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Take-Home Pay

What is a 'Take-Home Pay'

Take-home pay is the money that an employee actually receives from working after employment taxes and the cost of benefits and retirement contributions are subtracted. Take-home pay is calculated by taking the monthly gross income and subtracting federal income tax, Social Security and Medicare contributions, any state or local income taxes, monthly health and dental insurance premiums, 401(k) contributions and contributions to flexible spending accounts. The money that remains is what an employee takes home and has available for expenses, such as paying a mortgage, buying groceries and making discretionary purchases. Next Up Gross Earnings Gross Income Base Pay Gross Up

Explaining 'Take-Home Pay'

Because of all these payroll deductions, your take-home pay or net pay often differs significantly from your gross pay. When considering a salary offer for a job, raise or promotion, consider your take-home pay as well as your gross pay.

How to Calculate Take-Home Pay as a Percentage of Gross Pay

To calculate your take-home pay as a percentage of gross pay, figure out your gross pay. Use the gross pay noted on your paycheck, divide your annual salary by the number of pay periods in the year, or multiply your hourly rate by the number of hours worked in that pay period. Then, divide your take-home pay by your gross pay and multiply by 100.

How to Calculate Your Hourly Take-Home Pay Rate

To calculate the amount of take-home pay you earn per hour, take your take-home pay and divide it by the number of hours you have worked. You can do this calculation for a year's worth of work or for a single pay period.

How to Find Take-Home Pay on Your Paycheck Stub

The amount on your paycheck is your take-home pay. Most paycheck stubs label this amount as net pay. Stubs note your gross earnings, a list of your taxes and deductions, and your net pay. Many paycheck stubs also have a year-to-date field that shows the total net or take-home pay you have earned since January 1 of the current year.


Further Reading


Consumer response to the timing of income: Evidence from a change in tax withholding
www.nber.org [PDF]
… Matthew D. Shapiro Joel Slemrod Department of Economics School of Business Administration The University of … Wilcox, David W., "Income Tax Refunds and the Timing of Consumption Expenditure," Economic Activity Section … TABLE 1 Spend or Save Extra Take-Home Pay …

The mismeasure of mammon: Uses and abuses of executive pay dataThe mismeasure of mammon: Uses and abuses of executive pay data
papers.ssrn.com [PDF]
… Matthew D. Shapiro Joel Slemrod Department of Economics School of Business Administration The University of … Wilcox, David W., "Income Tax Refunds and the Timing of Consumption Expenditure," Economic Activity Section … TABLE 1 Spend or Save Extra Take-Home Pay …

The economic consequences of President MitterrandThe economic consequences of President Mitterrand
academic.oup.com [PDF]
… Matthew D. Shapiro Joel Slemrod Department of Economics School of Business Administration The University of … Wilcox, David W., "Income Tax Refunds and the Timing of Consumption Expenditure," Economic Activity Section … TABLE 1 Spend or Save Extra Take-Home Pay …

What does financial literacy training teach us?What does financial literacy training teach us?
www.tandfonline.com [PDF]
… Matthew D. Shapiro Joel Slemrod Department of Economics School of Business Administration The University of … Wilcox, David W., "Income Tax Refunds and the Timing of Consumption Expenditure," Economic Activity Section … TABLE 1 Spend or Save Extra Take-Home Pay …

An inclusive, progressive national savings and financial services policyAn inclusive, progressive national savings and financial services policy
heinonline.org [PDF]
… Matthew D. Shapiro Joel Slemrod Department of Economics School of Business Administration The University of … Wilcox, David W., "Income Tax Refunds and the Timing of Consumption Expenditure," Economic Activity Section … TABLE 1 Spend or Save Extra Take-Home Pay …

“Robbing Peter to pay Paul”: Economic and cultural explanations for how lower-income families manage debt“Robbing Peter to pay Paul”: Economic and cultural explanations for how lower-income families manage debt
academic.oup.com [PDF]
… Matthew D. Shapiro Joel Slemrod Department of Economics School of Business Administration The University of … Wilcox, David W., "Income Tax Refunds and the Timing of Consumption Expenditure," Economic Activity Section … TABLE 1 Spend or Save Extra Take-Home Pay …

Financial education and timely decision support: Lessons from Junior AchievementFinancial education and timely decision support: Lessons from Junior Achievement
www.aeaweb.org [PDF]
… Matthew D. Shapiro Joel Slemrod Department of Economics School of Business Administration The University of … Wilcox, David W., "Income Tax Refunds and the Timing of Consumption Expenditure," Economic Activity Section … TABLE 1 Spend or Save Extra Take-Home Pay …

The economics of employer versus individual mandatesThe economics of employer versus individual mandates
www.healthaffairs.org [PDF]
… Matthew D. Shapiro Joel Slemrod Department of Economics School of Business Administration The University of … Wilcox, David W., "Income Tax Refunds and the Timing of Consumption Expenditure," Economic Activity Section … TABLE 1 Spend or Save Extra Take-Home Pay …

The influence of consumer socialisation in the home on gender differences in financial literacyThe influence of consumer socialisation in the home on gender differences in financial literacy
onlinelibrary.wiley.com [PDF]
… Matthew D. Shapiro Joel Slemrod Department of Economics School of Business Administration The University of … Wilcox, David W., "Income Tax Refunds and the Timing of Consumption Expenditure," Economic Activity Section … TABLE 1 Spend or Save Extra Take-Home Pay …



Q&A About Take-Home Pay


What is personal income?

Personal income refers to the total earnings from wages, investment and other ventures. It is the sum of all incomes received by individuals or households during a given period.

How do you calculate how much take-home pay you earn per hour?

Take your take-home pay and divide it by the number of hours you have worked. You can do this calculation for a year's worth of work or for a single paycheck period.

How can you calculate personal income?

You can calculate personal income by adding up all incomes received by individuals or households within a country in a given period of time. This number may be adjusted for inflation using an index such as RPI (retail price index). The resulting figure is called real personal disposable income (RPDI). This means that it has been adjusted for inflation and taxes so that it represents how much money people have available to spend after paying their taxes on goods and services they have purchased with their earned incomes. If there are no taxes on products, then this number would represent the amount of money left over after paying for basic necessities such as food, clothing, transportation etc., which is referred to as disposable household income (DHI). In practice, however, most countries tax at least some goods and services so that this number will not reflect what people actually have available to spend on non-essential items like entertainment or vacations. For example if someone earns $50 per week in wages but spends $40 each week on groceries then they only really have $10 per week left over for discretionary spending items like entertainment or vacations since they must pay 20% sales tax on those purchases leaving them with only $8 per week in discretionary spending money ($10 - 20% = 8 dollars). So while this person's "personal" disposable income might be calculated at $50 per week because he/she receives wages from his/her employer who pays him/her before sales tax is deducted; his/her "

What does most paycheck stubs label as net earnings?

Most paycheck stubs label this amount as net earnings. Stubs note your gross earnings, a list of deductions and taxes, and net earnings on each check stub. Many paycheck stubs also have a year to date field that shows total net or take home earnings since January 1st current year.

What does personal income include?

Personal income includes wages, investment and other ventures. It also includes any money received by individuals or households during a given period of time.

What is take-home pay?

Take home pay is the money that an employee actually receives from working after employment taxes and the cost of benefits and retirement contributions are subtracted.

How do you calculate your take-home pay as a percentage of gross pay?

You figure out your gross pay, divide your annual salary by the number of pay periods in the year, or multiply your hourly rate by the number of hours worked in that pay period. Then, divide your take-home pay by your gross pay and multiply by 1.

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