Calculating net income for individuals
Individuals can also calculate their net income to see how much money they take home after certain deductions. If you’re wondering how much money you actually make, start by finding your gross income.
Your gross income is how much money you make before taxes and deductions, including taxable wages, tips, and income from interest and dividends. Then subtract taxes, payroll deductions, and other expenses from your gross income—this includes payroll taxes like Social Security, Medicare, and Medicaid, retirement account contributions to your 401(k) or IRA, and legal expenses like loans, wage garnishments, and child support. The result is your net income.
Individual net income example
Assume you earn a base salary of $50,000 spread across 24 paychecks. Each pay period, $430 goes toward income taxes, including Social Security, Medicare, and Medicaid taxes, $45 goes toward health insurance, and $200 goes toward your 401(k).
This means that each year, $10,320 goes toward taxes, $1,080 goes toward health insurance, and $4,800 goes toward your 401(k). This brings your total expenses to $16,200. Here’s your net income using the net income formula:
Net income = total revenue ($50,000) – total expenses ($16,200)
Net income = $33,800
Your net income for the year is $33,800, or $2,817 each month.