take home pay
The amount of income remaining after all deductions including taxes and retirement contributions.
Example
“Her take home pay was $3,200 despite a $4,500 gross salary.”
Memory Tip
What you actually TAKE HOME — not what the offer letter says.
Why It Matters
Take home pay is the actual money you receive in your bank account and can spend on living expenses, savings, and discretionary purchases. Understanding your take home pay is crucial for budgeting, setting financial goals, and making informed decisions about major purchases like homes or cars.
Common Misconception
Many people confuse their salary or gross income with their take home pay and are surprised when their paycheck is much smaller. The difference between these two amounts can be 20 to 40 percent depending on tax brackets, benefits elections, and other deductions.
In Practice
If you earn a gross annual salary of 60000 dollars, your take home pay might be around 45000 dollars after federal taxes of 7200 dollars, state taxes of 3000 dollars, social security of 3720 dollars, Medicare of 870 dollars, and health insurance premiums of 2400 dollars. This means you receive approximately 3750 dollars per month in take home pay rather than the 5000 dollars your gross monthly salary might suggest.
Etymology
Modern payroll term — the money you literally take home after deductions.
Common Misspellings
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Related Terms
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See Also
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