Take-home pay

Gross pay is what the job pays before anything comes out of it. Withholding is the tax the employer sends on the worker's behalf: federal income tax, Social Security and Medicare, and state income tax where there is one. A pre-tax deduction leaves the paycheck before the tax is worked out, such as a 401(k) contribution, an HSA contribution or a health insurance premium.

Take-home pay is what is left after both. It is the number on the deposit, and it is smaller than gross pay by the withholding and the deductions together.

A pre-tax deduction is money that was earned and then set aside or spent before it could reach the account. A 401(k) contribution sits in the 401(k); a premium bought the insurance.

A salary of $96,000 a year is $8,000 a month of gross pay. The paycheck sends $480 to a 401(k) and $250 to health premiums before tax, and $1,670 is withheld for federal, state and payroll taxes. The deposit is $5,600.

The $8,000 earned splits three ways: $730 set aside or spent pre-tax, $1,670 in tax, and $5,600 of take-home. A plan built on take-home starts from the $5,600, and the $480 in the 401(k) is a contribution the deposit never shows.

Gross pay, monthly

$8,000

401(k) contribution, pre-tax

− $480

Health premiums, pre-tax

− $250

Taxes withheld

− $1,670

Take-home pay

$5,600

Take-home pay is the income a month is planned from. Spending lines, savings and investment contributions come out of the deposit, so a share of income is a share of the $5,600, and a share of the $8,000 would count money that never arrived.

Pre-tax contributions sit outside that figure. The $480 to the 401(k) is a contribution toward retirement that the deposit does not show, so a plan that counts only what leaves the account after the deposit understates what is being set aside by that amount.

On the Plan, Taiga Finance's Income section holds one line per paycheck, each with a monthly expected amount and, through the month, a meter of what has been received against it. The band at the top of the Plan is drawn against the take-home pay: the sum of the paycheck lines' monthly amounts, with the planned Investments, Savings and Spending as its segments.

A pre-tax deduction is a line of its own in Income, marked “pre-tax”, with a “Counts toward” choice of Investments, Savings or Neither. One that counts toward a section is marked with that section's name, and the section carries a matching row. The band's working lists “Total income” and “Before take-home”, the deductions, above the take-home. No gross figure is typed in: take-home comes from the paycheck lines, and each deduction is its own line.

The Recurring page's “Of take-home” gauge divides monthly recurring outflow by the same take-home. When the Plan has no paycheck lines, it uses the recurring income it has found instead.