What Disappears Before Payday
Gross is the headline on your offer letter; net is what you can actually spend. Before money reaches checking, FICA (7.65% for most W-2 workers), federal withholding, state tax where it applies, and pre-tax benefits all take a slice. This isn't a scam—it's how payroll works—but it means a $60,000 salary often lands closer to $45,000–$48,000 in annual take-home, not $60,000.
If you budget rent or car payments on gross, you're planning with money that never arrives. The 50/30/20 rule only works when the denominator is net pay.
- FICA first: Social Security and Medicare come off the top—flat rate, no wiggle room.
- Withholding varies: Your W-4 controls how much federal tax is held each check—see our W-4 guide if refunds or April bills swing wildly.
- Benefits shrink net further: 401(k) and health premiums are often pre-tax—good for taxes, less cash in hand today.
Why Bonuses and Side Income Feel Different
Bonuses are often withheld at a flat 22% federal rate even if your real annual bracket is lower or higher—that's why a $5,000 bonus might deposit like $3,200 while your regular check feels "normal." Gig income has no withholding at all until you set it up, which is why side hustle taxes surprise people in April.
Each income stream has its own tax story. Mixing W-2 and 1099 without adjusting withholding is the fastest way to think you're earning more than you are.
Run Your Real Number Before You Commit
Don't sign a lease, car note, or debt payment based on gross. Plug your salary, state, filing status, and benefit elections into our Salary Calculator and use the monthly net line as your budget ceiling.