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Payroll Gross-to-Net Worksheet
Gross-to-net payroll worksheet in order: pre-tax deductions, taxable wages, FICA, Additional Medicare, Pub 15-T withholding, post-tax items, net pay.
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What you get
- The correct order of operations from gross pay to net pay, one step per line
- A taxable-wage matrix showing which deductions reduce income tax wages, FICA wages, or both
- Two worked examples that add up, including an employee past the 2026 Social Security wage base and into Additional Medicare
- A plain-English walkthrough of the IRS Publication 15-T percentage method
- A blank worksheet you can copy into Excel or Google Sheets for payroll spot checks
Template preview
A preview of the structure. Download the PDF or CSV for the complete, ready-to-use version.
Inputs for one employee, one pay period
- Pay frequency and pay periods per year— Weekly 52, biweekly 26, semi-monthly 24, monthly 12
- Gross earnings this period— Salary or hours x rate, plus overtime, bonus, commission, paid leave
- Form W-4 entries— Filing status, Step 2 checkbox, Step 3 credits, Step 4(a) other income, 4(b) deductions, 4(c) extra withholding
- State withholding form— e.g. California DE 4; some states use the federal W-4
Step order: gross to net
| Step | What to do | Formula |
|---|---|---|
| 1 | Gross pay | All earnings for the period |
| 2 | Subtract Section 125 deductions | Reduces income tax and FICA wages |
| 3 | Subtract traditional 401(k) / 403(b) | Reduces income tax wages only; still subject to FICA |
| 4 | Work out taxable wages for each tax | FICA wages = gross - Section 125. Federal income tax wages = gross - Section 125 - 401(k). State wages per state rules |
Which deductions reduce which wages
Federal treatment. States generally follow it, but not always: Pennsylvania, for example, does not exclude traditional 401(k) deferrals from state personal income tax. Check each state where you withhold.
| Deduction | Federal income tax wages | Social Security and Medicare wages | FUTA wages |
|---|---|---|---|
| Section 125 medical, dental, vision premiums | Reduced | Reduced | Reduced |
| Health FSA / dependent care FSA (Section 125) | Reduced | Reduced | Reduced |
| HSA through a cafeteria plan | Reduced | Reduced | Reduced |
| Traditional 401(k) / 403(b) | Reduced | Not reduced | Not reduced |
Federal income tax: the Publication 15-T percentage method
IRS Publication 15-T (2026) gives the tables. The method below is Worksheet 1A for automated payroll systems with a 2020-or-later Form W-4. It is described step by step here without reproducing the brackets, which change every year; always pull them from the current Publication 15-T at irs.gov/publications/p15t.
Worksheet 1A, in plain English
- 1.Annualize: multiply the period's federal taxable wages by the number of pay periods in the year.
- 2.Add the annual amount from W-4 Step 4(a) (other income) and subtract Step 4(b) (deductions).
- 3.If the Step 2 checkbox is not checked, subtract the standard adjustment listed in Worksheet 1A for the employee's filing status. The result is the Adjusted Annual Wage Amount.
- 4.Find the row in the Annual Percentage Method table for the filing status (use the Step 2 table if the box is checked). Tentative annual withholding = the table's base amount + the percentage x the amount over the row's lower limit.
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How to use this template
- 1
Collect the inputs
Gather gross earnings for the period, the employee's Form W-4 and state withholding form, benefit elections, garnishment orders, and year-to-date FICA wages.
- 2
Subtract pre-tax deductions to get each taxable wage base
Section 125 premiums reduce both income tax and FICA wages. Traditional 401(k) deferrals reduce income tax wages only. Work out a separate wage base for each tax.
- 3
Calculate taxes in order
Social Security (6.2% up to the annual wage base), Medicare (1.45% plus 0.9% on wages over $200,000 YTD), federal income tax using Publication 15-T, then state and local taxes.
- 4
Subtract post-tax deductions
Take Roth 401(k), garnishments, union dues, and voluntary after-tax items last. Garnishment limits are based on disposable earnings, which are calculated after taxes.
- 5
Check the result
Gross minus every deduction must equal net. Compare with your payroll system's output and investigate any difference over a few cents.
Frequently asked questions
How do you calculate gross to net pay?
Start with gross pay, subtract pre-tax deductions to find each taxable wage base, calculate Social Security, Medicare, federal income tax, and state and local taxes, then subtract post-tax deductions. In Example A, $2,400.00 gross less $696.73 in deductions gives $1,703.27 net.
Is 401(k) taken out before FICA?
No. Traditional 401(k) deferrals reduce federal income tax wages but remain subject to Social Security and Medicare. Section 125 cafeteria plan premiums are different: they reduce both income tax and FICA wages. So an employee with $2,400 gross, $120 in 401(k), and $95 in medical premiums pays FICA on $2,305.
When does the 0.9% Additional Medicare tax apply?
Employers must withhold an extra 0.9% on wages paid to an employee in excess of $200,000 in the calendar year, starting in the pay period when YTD wages pass $200,000, regardless of filing status. There is no employer match. The employee settles any difference on their individual return.
What is the Social Security wage base for 2026?
$184,500, up from $176,100 in 2025, per the Social Security Administration. Employees and employers each stop paying the 6.2% Social Security tax once an employee's wages for the year reach that amount, so the maximum employee Social Security tax is $11,439. Medicare has no wage cap.
How does the IRS percentage method work?
Annualize the period's taxable wages, adjust for W-4 Step 4(a) and 4(b) and the standard adjustment, and apply the Annual Percentage Method table: base amount plus the rate on the amount over the row's floor. Divide by pay periods, subtract Step 3 credits per period, and add Step 4(c) extra withholding. Tables are in IRS Publication 15-T.
Can I use Excel as a payroll calculator?
Yes, for checking and small payrolls, if you update rates each January and build each tax on the correct wage base. Copy the blank worksheet into columns, add the Pub 15-T annual table on a separate tab, and use lookups for the bracket. Most employers still run live payroll through software that files and deposits taxes.