Monthly Pay Calculator
Calculate your net take-home pay based on annual gross income and deductions.
How to Calculate Monthly Pay
Understanding your monthly pay is essential for budgeting and financial planning. While many people discuss their income in terms of an annual salary, the amount that actually hits your bank account every month—your net pay—is often significantly lower due to taxes and various deductions.
The basic formula used by our monthly pay calculator is:
Net Monthly Pay = (Gross Annual Salary / 12) – Monthly Taxes – Monthly Deductions
Gross vs. Net Income
Gross Income: This is the total amount of money earned before any taxes or other deductions are taken out. If you are offered a job with a salary of 50,000 per year, that is your gross income.
Net Income: Often called "take-home pay," this is the actual amount you receive in your paycheck. It is what remains after federal, state, and local taxes, Social Security contributions, and personal deductions (like health insurance or retirement savings) have been subtracted.
Common Factors Affecting Your Monthly Pay
- Income Tax: The percentage taken by the government depends on your total earnings and tax bracket.
- Retirement Contributions: Contributions to plans like a 401(k) or pension are often deducted directly from your gross pay.
- Health Insurance: If your employer provides health coverage, your portion of the premium is usually deducted monthly.
- FICA Taxes: This includes Social Security and Medicare taxes, which are standard deductions in many regions.
Real-World Example
Suppose you earn a gross annual salary of 72,000. Your estimated tax rate is 25%, and you have 300 in monthly health insurance and retirement deductions.
- Gross Monthly: 72,000 / 12 = 6,000
- Monthly Tax: 6,000 * 0.25 = 1,500
- Deductions: 300
- Net Pay: 6,000 – 1,500 – 300 = 4,200
In this example, while the gross monthly figure is 6,000, the actual amount available for spending is 4,200.