Which type of income is the amount you actually take home after taxes and deductions?

• A. Take-home pay
• B. Net income
• C. Gross income
• D. Disposable income

Answer: (B)

The main idea here is distinguishing what you actually receive versus what you earn before deductions. Net income is the amount left after subtracting taxes and other withholdings from your gross earnings. This is the money you truly take home and can spend or save, also commonly called take-home pay.

Gross income is the total earnings before any deductions, so it’s not what you take home. Disposable income is a broader economic term for the money available to spend after taxes, but it’s used in a wider context than a single paycheck. So net income best fits the description of the money you actually take home after taxes and deductions. For example, if your gross pay is $4,000 and $800 is withheld for taxes and $300 for benefits, your net income (take-home pay) is $2,900.