take-home pay

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noun \ ˈtāk-ˌhōm- \
Updated on: 26 Jul 2017

Definition of take-home pay

:income remaining from salary or wages after deductions (as for income-tax withholding)

First Known Use of take-home pay

1942


Financial Definition of TAKE-HOME PAY

take-home pay

What It Is

Take home pay is the portion of one's salary left after all payroll taxes have been deducted.

How It Works

John Doe has a salary of $100,000. He is paid 26 times per year (every other Friday). The federal and state payroll taxes (Social Security, Medicare, unemployment, 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. Taxes are not the only thing that can affect take home pay. If a person is having alimony, child support, retirement plan contributions, or other money withheld from his or her paycheck, these things will also affect the person's take home pay.


TAKE-HOME PAY Defined for English Language Learners

take-home pay

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noun

Definition of take-home pay for English Language Learners

  • : the amount of money that a person earns after taxes and other amounts have been subtracted


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