Net income: what it means and how to find yours

What net income means

Cambridge Dictionary defines net income as a person's income after all tax and other costs have been paid. It also gives an example: someone earns 50,000 gross and a net income of about 36,000.

For an employee, net income is also called take-home pay. For a business, net income is what is left after the costs of running it, which is a different use of the same word. This page is about the paycheck.

How to find your net income

Look at your pay stub. Net pay is the line near the bottom, after the federal income tax, Social Security, Medicare and any other deductions such as health insurance or a 401(k). The sum of those net pay lines over a year is your annual net income.

You can also work it out. Take gross pay, subtract Social Security (6.2%) and Medicare (1.45%), subtract federal income tax, and subtract anything else taken out. Our paycheck calculator does the tax math for a given salary.

Net income and your budget

Net income is the number to plan with, because it is the money that exists. A plan that splits your income between needs, wants and saving works best on net, since you cannot spend money that was taken before it arrived.

As a couple, adding both net incomes gives you the money you have between you. Splitting shared bills in proportion to each net income is one fair way to keep it even.

A worked example: $65,000 a year, single

• Gross pay per paycheck (every two weeks): $65,000 / 26 = $2,500.
• Net pay per paycheck: about $2,093 (our paycheck calculator, before state tax).
• Annual net income: $2,093 x 26 = $54,418.
• Held back over the year: $65,000 - $54,418 = $10,582.
• Share kept: $54,418 / $65,000 = 83.7%.
• Monthly net income on average: $54,418 / 12 = about $4,535.