1. What is Net Income?

Net income, also known as take-home pay, is the amount of money remaining after all deductions and taxes have been subtracted from gross income. It represents the actual amount available for spending, saving, or investing.

2. How the Calculation Works

The calculator uses the following formula:

Where:

• Gross Income — Total earnings before any deductions
• Federal Tax — Amount withheld for federal income tax
• State Tax — Amount withheld for state income tax
• FICA — Social Security and Medicare taxes (7.65% of gross income typically)

3. Importance of Calculating Net Income

Details: Knowing your net income is essential for personal budgeting, loan applications, and financial planning. It helps you understand your actual purchasing power after taxes.

4. Using the Calculator

Tips: Enter all amounts in dollars. For most accurate results, use numbers from your pay stub. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between gross and net income?
A: Gross income is your total earnings before deductions, while net income is what you actually take home after all taxes and deductions.

Q2: Are there other deductions not included here?
A: Yes, this calculator focuses on core tax deductions. Other deductions like health insurance, retirement contributions, or wage garnishments would further reduce net income.

Q3: How often should I calculate my net income?
A: It's good practice to calculate it whenever your income or tax situation changes (new job, raise, tax law changes, etc.).

Q4: Why is FICA separate from other taxes?
A: FICA (Federal Insurance Contributions Act) taxes are distinct payroll taxes that fund Social Security and Medicare programs.

Q5: Can I use this for business income?
A: This calculator is designed for personal income. Business income has different tax considerations.