Gross vs Net: Reading Your Paystub

You negotiated a salary. You receive a different, smaller number. The gap isn't a mistake, and everything in it is labeled if you know what the labels mean.

Last verified 2026-07-16

Every line on a paystub, in order

Gross pay is the top line — total earned, the number in your offer letter. Net pay is the bottom line, what actually reaches your bank account. Everything between them is labelled, and the labels fall into three groups.

Pre-tax deductions come out first: traditional 401(k), HSA, often health insurance premiums. Because they're removed before tax is calculated, they lower the income you're taxed on. Then FICA — 6.2% Social Security plus 1.45% Medicare, 7.65% combined — is taken from wages. Then federal and state income tax withholding.

The order matters more than it looks. A pre-tax contribution costs you less than its face value in take-home pay, because you skip the tax on it too.

A refund is not a windfall

Withholding is an estimate your employer makes on your behalf all year, based on the W-4 you filled in. In April, the estimate gets reconciled against what you actually owed.

A large refund means the estimate was too high — you sent the government more than you owed and got it back, interest-free, up to sixteen months later. A large bill means the estimate was too low.

Neither one says anything about whether you paid too much tax overall. They only say whether the timing was right. The size of the refund is a withholding question, not a tax question.