TaxWrenTax glossary · Updated
Gross vs. net income
Short answer
Gross income is what you earn before anything is taken out; net income is what is left after taxes and deductions. A $60,000 salary in Texas leaves about $50,390 of take-home pay in 2026.
Gross income is everything you earn before anything is taken out. Net income is what is left after taxes and other deductions. For an employee that is take-home pay; for a business owner it is profit after expenses (and, before spending it, after tax).
On a paycheck: gross pay vs. take-home pay
A single filer earning $60,000 in 2026, with no 401(k), benefits or other deductions:
| Texas | California | New York | |
|---|---|---|---|
| Gross pay | $60,000 | $60,000 | $60,000 |
| Federal income tax | −$5,020 | −$5,020 | −$5,020 |
| Social Security | −$3,720 | −$3,720 | −$3,720 |
| Medicare | −$870 | −$870 | −$870 |
| State tax and payroll taxes | −$0 | −$2,420 | −$2,643 |
| Net (take-home) pay | $50,390 | $47,970 | $47,747 |
| Kept | 84.0% | 80.0% | 79.6% |
Other deductions also come out of gross pay: 401(k) contributions, health insurance premiums, union dues. Pre-tax ones lower your income tax too, so they reduce take-home pay by less than their amount. Try your own numbers in the take-home pay calculator.
For a business: gross receipts vs. net profit
A freelancer who bills $80,000 and spends $20,000 on business costs has gross income of $80,000 and net profit of $60,000. Self-employment tax of $8,478 is figured on the net profit, and income tax comes on top. See the 1099 tax calculator for the full picture.
How the tax terms fit in
- Gross income: all your income, before anything is subtracted. It decides whether you must file.
- Adjusted gross income: gross income minus adjustments such as IRA or HSA contributions.
- Taxable income: AGI minus the standard or itemized deductions; the brackets apply to it.
- Net income: what you keep after all taxes and deductions.
Work it out
Related terms
- Gross income
- All the income you receive as money, goods, property and services that isn't exempt from tax, before any deduction: wages, business receipts, interest, dividends, gains, retirement income and more. It decides whether you must file a return.
- Net income
- What is left after taxes and deductions. For a paycheck it is take-home pay (gross pay minus taxes and withholdings); for a business it is profit after expenses.
- Adjusted gross income
- Your gross income minus the adjustments listed on Schedule 1 of Form 1040, such as deductible IRA and HSA contributions, student loan interest and the deductible part of self-employment tax. It is on line 11 of Form 1040.
Frequently asked questions
What is the difference between gross and net income?
Gross income is the total you earn before anything is taken out. Net income is what is left after taxes and other deductions: take-home pay for an employee, profit after expenses for a business.
What is the net income on a $60,000 salary?
For a single filer in 2026: about $50,390 in Texas, $47,970 in California, $47,747 in New York, after federal income tax, Social Security, Medicare and state tax, with no 401(k) or other deductions.
Is salary gross or net?
A salary or hourly rate quoted in a job offer is gross pay. Your paycheck shows both: gross pay at the top and net pay after withholding at the bottom.
Do I use gross or net income for taxes?
Neither exactly. Tax forms start from gross income, subtract adjustments to get adjusted gross income (AGI), then subtract deductions to get taxable income, which the tax brackets apply to.
Sources: IRS Publication 501, Dependents, Standard Deduction, and Filing Information. Figures come from our tax data files; see the methodology. All terms: tax glossary.