1. What is Gross vs Net Income?

Gross income is the total amount you earn before any deductions are taken out. Net income is what remains after all deductions (taxes, insurance, retirement contributions, etc.) have been subtracted from your gross income.

2. How Does the Calculator Work?

The calculator uses a simple formula:

Where:

• Gross Income — Your total earnings before deductions
• Deductions — All amounts subtracted from your gross income (taxes, benefits, etc.)

Explanation: This calculation shows your actual take-home pay after all mandatory and voluntary deductions.

3. Importance of Understanding Net Income

Details: Knowing your net income helps with budgeting, financial planning, and understanding your true earning power. It's the amount you actually have available for living expenses and savings.

4. Using the Calculator

Tips: Enter your total gross income and the sum of all deductions in dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's included in deductions?
A: Deductions typically include federal/state taxes, Social Security, Medicare, health insurance, retirement contributions, and other pre-tax benefits.

Q2: Why is my net income much lower than gross?
A: Depending on your tax bracket and benefits, deductions can account for 20-40% of your gross income.

Q3: How often should I calculate this?
A: Review with each paycheck and especially when your income or benefits change.

Q4: Are bonuses included in gross income?
A: Yes, all earnings before deductions count as gross income.

Q5: Can I reduce deductions to increase net income?
A: Some deductions (like retirement contributions) are voluntary, but taxes and mandatory benefits cannot be avoided.