Career & Income

After-Tax Income

Your take-home pay after federal, state, and payroll taxes are deducted—the actual money you can spend.

Also known as: after tax income, take home income, net income, disposable income

What You Need to Know

After-tax income is what actually hits your bank account—the money you can spend, save, or invest.

The Calculation: Gross Income

Taxes = After-Tax Income

Example:

Gross salary: $75,000
Federal tax (22% bracket): -$11,400
State tax (5%): -$3,750
FICA (Social Security + Medicare): -$5,738
After-tax income: $54,112 (72% of gross)

Why It Matters: Most people think in gross income ("I make $75k"), but you live on after-tax income ($54k). This gap causes budget problems.

Tax Burden by Income:

$30,000 salary: ~85% after-tax (15% taxes)
$75,000 salary: ~72% after-tax (28% taxes)
$200,000 salary: ~65% after-tax (35% taxes)

The "Tax Surprise" Problem:

Freelancers often forget to budget for taxes (30-35% of gross)
Side hustles can jump you to higher tax bracket
Bonuses are taxed heavily (22-37% federal withholding)

How to Calculate Yours:

Check your latest paystub (net pay = after-tax income)
Multiply annual gross by 0.70-0.75 for rough estimate
Use a paycheck calculator for precision

Improve After-Tax Income:

Contribute to 401(k): Reduces taxable income (pre-tax savings)
HSA contributions: Triple tax advantage
Tax credits: Directly reduce tax owed (Child Tax Credit, EITC)
Deductions: Lower taxable income (mortgage interest, charity)

The Bottom Line: Budget based on after-tax income, not gross. If you make $75k but live like you make $75k, you'll go into debt. Live like you make $54k and invest the discipline.

Put your knowledge into action with these interactive tools:

Payroll Calculator

Calculate exact take-home pay after federal, state taxes, 401(k), health insurance, and all deductions

Try Calculator →

AGI (Adjusted Gross Income)

Your total gross income minus specific deductions, used to determine tax liability and eligibility for credits.

FICA (Federal Insurance Contributions Act)

Payroll taxes that fund Social Security and Medicare, totaling 7.65% of wages for employees (matched by employers).

Gross Income

Your total income before any taxes or deductions are taken out—the starting point for tax calculations.

Marginal Tax Rate

The tax rate applied to your last dollar of income—the rate you pay on additional earnings.

Standard Deduction

A fixed dollar amount that reduces your taxable income, available to all taxpayers who don't itemize.

Tax Bracket

The range of income taxed at a specific rate under the U.S. progressive tax system.