Gross vs net pay: a paycheck calculator for personal finance class
Gross pay is hours times the hourly rate, with overtime hours over 40 a week paid at one and a half times the rate. Net pay is what is left after the deductions: 6.2% for Social Security, 1.45% for Medicare, and federal and state income tax withholding. Example: a student earning $16 an hour who works 45 hours a week, paid every two weeks, earns $1,520.00 gross per paycheck and takes home $1,221.32 with 8% federal and 4% state withholding.
Paycheck calculator
Federal and state withholding depend on the W-4 and the state, so students enter them as percentages. The calculator keeps Social Security and Medicare at the 2026 employee rates. Overtime is any hour over 40 in a week.
Worked example: one biweekly paycheck
Maya works at a grocery store for $16.00 an hour. She works 45 hours each week and is paid every two weeks.
| Line | Amount |
|---|---|
| Regular pay: 2 weeks × 40 hours × $16.00 | 1,280.00 |
| Overtime: 2 weeks × 5 hours × $24.00 | 240.00 |
| Gross pay | 1,520.00 |
| Social Security 6.2% | −94.24 |
| Medicare 1.45% | −22.04 |
| Federal withholding 8% | −121.60 |
| State withholding 4% | −60.80 |
| Net pay | 1,221.32 |
What the example shows: Maya's take-home pay is about 80% of her gross pay. A budget built on "$16 an hour times 90 hours" plans with $1,440 and misses that overtime adds money while deductions take almost $300 away. Students should always budget from net pay.
Classroom questions
- Maya's manager cuts her to 38 hours a week. What is her gross pay per biweekly paycheck?
- Using the same withholding as above, what is her net pay for that paycheck?
- How much of the original paycheck came from overtime, in dollars and as a share of gross pay?
- Over 26 paychecks a year, how much does Maya pay in Social Security and Medicare together at 45 hours a week?
- Why is the overtime rate $24.00 and not $16.00? Which law sets it?
Answer key
- 2 × 38 × $16.00 = $1,216.00. No overtime, because she stays under 40 hours each week.
- Deductions: $75.39 + $17.63 + $97.28 + $48.64 = $238.94, so net pay is $977.06.
- $240.00, which is 15.8% of $1,520.00.
- ($94.24 + $22.04) × 26 = $3,023.28.
- The federal Fair Labor Standards Act requires at least one and a half times the regular rate for hours over 40 in a workweek, so $16.00 × 1.5 = $24.00.
Teaching notes
- Overtime is per week, not per paycheck. 80 hours in two weeks can mean no overtime (40 + 40) or 5 hours of it (45 + 35). Ask students to check each week separately.
- Withholding is not the tax bill. Federal and state withholding are prepayments; the real tax is settled on the tax return. That is why the calculator takes them as inputs.
- Social Security has a wage cap. In 2026 the 6.2% applies to the first $184,500 of earnings a year; Medicare has no cap. Hourly student jobs never reach it, but it is a good question for advanced classes.
Sources: IRS, Topic no. 751, Social Security and Medicare withholding rates (6.2% and 1.45% for the employee, 2026 wage base $184,500; page reviewed 24 September 2026). U.S. Department of Labor, Wage and Hour Division, Overtime Pay (time and one-half for hours over 40 in a workweek). Some states have stricter overtime rules, for example daily overtime. The example figures are illustrative.
Disclosure: Still Penny makes the Personal Finance Bundle for High School (25.90 EUR, one-time purchase on Etsy): eight printable resources for grades 8 to 12, including a pay stub analysis with overtime and payroll mistakes, a budget project, debt payoff and credit, with answer keys. It is optional: the calculator and questions above are free to use in class.
General information, not tax advice.