What is the difference between gross and net income?
Gross income is your total earnings before deductions. Net income is what remains after subtracting federal tax, state tax, and other withholdings from your gross pay.
Is net income the same as take-home pay?
Yes, net income and take-home pay refer to the same thing—the actual amount you receive after all deductions are applied.
How do I calculate my net income?
Subtract all deductions (federal tax, state tax, and other withholdings) from your gross income. For example, if your gross is $5,000 and deductions total $1,200, your net income is $3,800.
What is an effective tax rate?
The effective tax rate is the percentage of your gross income paid in total taxes. It's calculated by dividing your total tax by gross income, typically ranging from 15-25% for most earners.
Can net income be negative?
Technically yes, if your deductions exceed your gross income, though this rarely occurs in typical employment unless you have unusual withholdings or are reporting investment losses.