Take Home Pay
What it is:
Take home pay is the portion of one's salary left after all payroll have been deducted.
How it works (Example):
John Doe has a salary of $100,000. He is paid 26 times per year (every other Friday). The federal and state payroll (Social Security, Medicare, , and federal withholding) amount to, say, 10% of his salary.
John Doe's salary divided by 26 paychecks equals $3,846.15 per paycheck. However, because John Doe has payroll taxes withheld, his take home pay is actually 90% of that, or $3,461.53.
Why it Matters:
Understanding the difference between salary and take home pay is important for anyone trying to create and live on a household budget. alimony, child support, retirement plan contributions, or other withheld from his or her paycheck, these things also affect the person's take home pay.are not the only thing that can affect take home pay. If a person is having