Take-home Pay Definition
The pay received by an employee after subtracting employment taxes, benefit costs, retirement contributions, and any other deductions from the paycheck.
Take-home Pay Extended Definition
Also known as “net pay” or “net income,” take-home pay is calculated by taking an individual’s gross income and subtracting taxes and benefits.
Taxes and benefits to subtract include:
- Federal income tax
- Medicare and Social Security taxes
- State and local income taxes
- Health and dental insurance premiums
- Retirement contributions
- Contributions to flexible spending accounts
The remaining money is what an employee receives in their paycheck. They can use this amount to cover the cost of general living expenses, including housing, food, and discretionary items.
Last Updated By
Rachel Blakely-Gray | May 01, 2023