Take-Home Pay Definition

Term Definition
The pay received by an employee, after subtracting employment taxes, benefit costs, retirement contributions and other deductions from the paycheck.

Extended Definition
Also known as “net pay” or “net income,” take-home pay is calculated by taking an individual’s gross income and subtracting 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 and other obligations. The remaining money is what an employee retains to cover the cost of general living expenses, including housing, food and discretionary items.

Related Blog Articles:
Understanding Take-Home Pay
Payroll Tax Cut Gives Employees More Take-Home Pay in 2011