Take-Home Pay The deductions taken out of your paycheck help support schools, roads, national parks, and more. Why do you think you have to pay taxes?

Take-Home Pay

The deductions taken out of your paycheck help support schools, roads, national parks, and more.

Why do you think you have to pay taxes?

Lesson Objective Determine the amount withheld for federal income tax.

Content Vocabulary

federal income tax

withholding allowance

federal income tax

Money withheld by an employer from an employee’s paycheck to pay federal government taxes.

federal income tax

Money withheld by an employer from an employee’s paycheck to pay federal government taxes.


The number of people an employee supports, which helps employers know how much money to withhold for federal income tax.


The number of people an employee supports, which helps employers know how much money to withhold for federal income tax.

Carla Garza’s gross pay for this week is $425.88. She is married and claims 2 allowances—herself and her husband.

What amount will be withheld from Garza’s pay for FIT?

Example 1Example 1

Steps:

1.Find the income range from the federal tax tables on pages 788-791 in your textbook.

2.Find the column for 2 allowances.

3.The amount of income to be withheld is $19.

Example 1 AnswerExample 1 Answer

Lance Han’s gross pay for this week is $386.88.

He is married and claims 1 allowance.

What amount will be withheld from Han’s pay for FIT?

Example 2Example 2

Steps:

1.Find the income range from the federal tax tables on pages 788-791 in your textbook.

2.Find the column for 1 allowance.

3.The amount of income to be withheld is $31.

Example 2 AnswerExample 2 Answer

Use the tax tables on pages 788-791 in your texbook to find the amount withheld.

Joseph Napoli, single.Earns $524 per week.Claims 2 allowances.What is the FIT withheld?

Practice 1Practice 1

$48

Practice 1 AnswerPractice 1 Answer

Use the tax tables on pages 788-191 in your textbook to find the amount withheld.

Amanda Hagel earns $476 a week. She is married and claims 2 allowances. Next year she will have a child and will claim an additional allowance. How much less will be withheld for federal income tax next year?


$312


Lesson Objective Compute state taxes on a straight percent basis.

Content Vocabulary

exemptionexemption

Withholding allowances, which allow for supporting yourself, your spouse, and others in your family who are your dependents.

exemption

Withholding allowances, which allow for supporting yourself, your spouse, and others in your family who are your dependents.

Patricia Line’s gross pay is $65,800 a year. The state income tax rate is 3 percent of taxable wages.

Line takes a married exemption for herself and her husband. Use the Personal Exemptions table below to find out how much is withheld from her gross earnings for state income tax within the year.

Example 1Example 1

Personal Exemptions

Single: $1,500

Married: 3,600

Each Dependent: 700

Example 1 (cont.)Example 1 (cont.)

Find the taxable wages.

Annual Gross Pay – Personal Exemptions

$65,800.00 – $3,000.00 = $62,800.00

Example 1 Answer: Example 1 Answer: Step 1Step 1

Find the annual tax withheld.

Taxable Wages × Tax Rate

$62,800.00 × 3% = $1,884.00


Use the Personal Exemptions table in Example 1 above to find the amount withheld.

Tomoko Nakazawa.Earns $38,657 annually.Married, no dependents.What are her personal exemptions?


$3,000


Paul Chamello earns $168,000. He is single. His personal exemptions include himself and his five children. The state tax rate is 2.5 percent of taxable income.

What amount is withheld yearly for state income tax?


$4,075


Lesson Objective Determine state taxes on a graduated income tax basis.

Content Vocabulary

graduated income taxgraduated income tax

A system that increases the tax rate at different levels of income.

graduated income tax

A system that increases the tax rate at different levels of income.

Louise Maffeo’s annual salary is $34,500. She is paid semi-monthly. Her personal exemptions total $1,500.

How much does her employer deduct from each of Maffeo’s semi-monthly paychecks for state income tax?

Example 1Example 1

Figure 2.2Figure 2.2

Find the taxable wages.

Annual Gross Pay – Personal Exemptions

$34,500.00 – $1,500.00 = $33,000.00


Find the annual tax withheld.

1. First $1,000: 1.5% of $ 1,000.00 = $ 15.00

2. Next $2,000: 3.0% of $ 2,000.00 = 60.00

3. Next $2,000: 4.5% of $ 2,000.00 = 90.00

4. Over $5,000: 5.0% of ($33,000.00 – $5,000.00)

5.0% of $28,000.00 = 1,400.00

Total $1,565.00


Find the tax withheld per pay period.

Annual Tax Withheld ÷ Number of Pay Periods per Year

$1,565.00 ÷ 24 = $65.208 or $65.21


Patricia Hanson.Annual gross pay of $24,300.Personal exemption of $1,500.2 percent state tax on first $5,000.3 percent state tax on amount over $5,000.

What is her taxable income?


$22,800


Use the following tax table to find the amount of state tax withheld.

First $3,500 3%

Next $3,500 4.5%

Over $7,000 7%


Caroline Pollack’s gross pay is $31,452. She has personal exemptions of $3,600.

How much is withheld from her semimonthly paycheck for state income tax? Round to the nearest cent..

Practice 2 (cont.)Practice 2 (cont.)

$71.76


Lesson Objective Compute the amount withheld for Social Security and Medicare taxes.

Content Vocabulary

Social SecuritySocial Security

A federal government program to pay for retirement and disability benefits.

Social Security

A federal government program to pay for retirement and disability benefits.Medicare

Medicare

A federal government program to provide medical insurance.

Medicare

A federal government program to provide medical insurance.

Otis Hassan’s gross biweekly pay is $648.00. His earnings to date for the year total $15,228.

What amount is deducted from his pay this week for Social Security? For Medicare? What is the total deduction?

Example 1Example 1

Find the Social Security tax withheld.

Gross Pay × Tax Rate

$648.00 × 6.2% = $40.176 = $40.18


Find the Medicare tax withheld.

Gross Pay × Tax Rate

$648.00 × 1.45% = $9.396 or $9.40


Find the total deduction.

Social Security Tax + Medicare Tax

$40.18 + $9.40 = $49.58


Find the Social Security and Medicare taxes withheld for this pay period.

Tom Mendoza.Monthly salary $4,800.$52,800 earned this year to date.How much deducted this pay period for Social Security? For Medicare?


For Social Security: $297.60

For Medicare: $69.60


Stephanie Metcalf earns $91,992 a year. Her salary is paid monthly. What are her year-to-date earnings for November? How much is deducted from her check in November for Social Security? For Medicare?

How much is deducted from her check in December for Social Security? For Medicare?


Year-to-date earnings for November: $84,326

Social Security deduction in November: $475.29

Medicare deduction in November: $111.16

Social Security deduction in December: $35.59

Medicare deduction in December: $111.16


• Assignment -

Lesson Objective Calculate the deduction for group insurance.

Content Vocabulary

group insuranceSocial Security


Social Security


group insurance

Health insurance offered by many businesses to employees, pain in part by the business and in part by the employee.

group insurance

Health insurance offered by many businesses to employees, pain in part by the business and in part by the employee.

Lawrence Butler has family medical coverage through the group medical plan his employer provides. The annual cost of the plan is $4,500. The company pays 80 percent.

How much does Butler pay annually?

Example 1Example 1

Find the percent paid by employee.

100% – Percent Company Pays

100% – 80% = 20%


Find the total amount paid by employee.

Annual Amount × Employee’s Percent

$4,500 × 20% = $900.00


Nicholette McClure has family medical coverage through the group medical plan her employer provides. The annual cost of the plan is $5,000. The company pays 75 percent.

How much is deducted from her biweekly paycheck for medical insurance?

Example 2Example 2

Find the percent paid by employee.

100% – Percent Company Pays

100% – 75% = 25%


Find the total amount paid by employee.

Annual Amount × Employee’s Percent

$5,000 × 25% = $1,250


Find the deduction per pay period.

Total Annual Amount Paid by Employee Number of Pay Periods per Year

$1,250 ÷ 26 = $48.08


Annual cost of insurance: $4,160.Employer pays 80 percent.52 pay periods.Find the deduction per pay period.


$16


Ken Fujimoto’s employer pays 90 percent of his medical insurance and 60 percent of his dental insurance. Medical insurance costs $3,400 per year and dental insurance is $1,300.

How much is deducted from Ken’s semimonthly pay for medical insurance? How much for dental insurance?


Medical: $14.17

Dental: $21.67


net pay

The amount of money you have left after your employer subtracts all tax withholdings and personal deductions from your gross pay, also called net income or take-home pay.

net pay

The amount of money you have left after your employer subtracts all tax withholdings and personal deductions from your gross pay, also called net income or take-home pay.

Lesson Objective Calculate net pay per pay period.

Content Vocabulary

net pay

Alysha Moore’s gross weekly salary is $600. She is married and claims 3 allowances. The Social Security tax is 6.2 percent. The Medicare tax is 1.45 percent. The state tax is 1.5 percent. Each week she pays $12.40 for medical insurance and $2.50 for charity.

Is Moore’s earnings statement correct?

Example 1Example 1

Figure 2.4Figure 2.4

Find the total deductions.

a. Federal withholding $35.00

b. Social Security: 6.2% of $600.00 37.20

c. Medicare: 1.45% of $600.00 8.70

d. State tax: 1.5% of $600.00 9.00

e. Medical insurance 12.00

f. Charity 2.50

Total $104.80


Find the net pay.

Gross Pay – Total Deductions

$600.00 – $104.80 = $495.20

Her statement is correct.


Find the deductions and the net pay. Social Security is 6.2 percent of the first $84,900. Medicare is 1.45 percent of all income.

Use the tax tables on pages 788-791 in your textbook for federal tax. Round to the nearest cent.


Pierre Lamont is married and claims 4 allowances. His gross weekly salary is $628. Each week he pays federal, Social Security, and Medicare taxes, as well as $28 for medical insurance and $12 for union dues.

What are his deductions and his net pay?


Federal: $29

Social Security: $38.94

Medicare: $9.11

Net pay: $510.95


Find the deductions and the net pay. Social Security is 6.2 percent of the first $84,900. Medicare is 1.45 percent of all income.

Use the tax tables on pages 788-791 in your textbook for federal tax. Round to the nearest cent.


Michele Sawyer is single and claims 1 allowance. She earns $11.50 per hour as a pest controller and works 40 hours.

Deductions include federal income tax, Social Security, and Medicare.


State taxes are 4 percent of gross income, and local taxes are 2 percent of gross income. She pays $42.75 per week for medical insurance.

What are her deductions and net pay for the week?


Federal: $48

Social Security: $28.52

Medicare: $6.67

State tax: $18.40

Local tax: $9.20

Medical insurance: $42.75

Net pay: $306.46


SummarySummarySummarySummary

Types of Agencies

Pay Deductions

Your employer takes deductions from your

paycheck for the government and other

agencies.

State Income Tax Federal Income Tax

Social Security pays for retirement and disability benefits.

Group Health Insurance is often less expensive than individual

insurance.

A. $14.00

B. $15.00

C. $19.00

D. $20.00

1. Tonya Westin’s gross pay for the week is $357.89. She is married and claims no allowances. Use the table on page A4 in the text. What amount will be withheld for FIT?

2. Dwight Fisher earns $42,500. He is married with three dependents which gives him a $10,000 exemption. His state had an income tax rate of 4.5%. How much does Dwight’s employer withhold annually from his gross earnings for state income tax?

A. $450.00

B. $1,230.90

C. $1,462.50

D. $1,912.50

3. ALGEBRA Reena Garcia is a sales manager. She is single and takes a $2,000 exemption. The state income tax rate is 3%. If her employer withholds $3,900 for state income tax annually, find her annual salary.

A. $85,400

B. $101,250

C. $125,600

D. $132,000

4. Mary Jane Porter has an annual gross pay of $32,100. Her exemptions total $3,500. The state tax on the first $5,000 is 1.5% and on amounts over $5,000 is 4.2%. Find the total tax withheld.

A. $1,009.85

B. $1,066.20

C. $1,213.20

D. $1,430.85

5. Kyle Gruber’s gross pay this month is $5,432.50. His earnings to date for the year total $12,300.75. How much does his employer deduct from his paycheck this month for Social Security?

A. $336.82

B. $356.59

C. $511.85

D. $575.60

6. Sui Chun’s gross pay last week was $2,350. Her earnings to date for the year are $43,500. How much did her employer deduct from her paycheck last week for Medicare?

A. $34.08

B. $47.00

C. $58.75

D. $65.90

7. Tamara Matta’s annual group insurance costs $5,800, and her company pays 75% of the cost. How much does Tamara pay monthly for insurance?

A. $100.90

B. $120.83

C. $280.50

D. $362.50

8. ALGEBRA Danford Kayne pays $231.60 per month for his group medical coverage. His employer pays 35% of the cost. How much is the annual premium for Danford’s health insurance?

A. $2,779.20

B. $3,843.10

C. $4,275.69

D. $5,904.33

9. Erika Morley’s gross weekly salary is $825.75. She is married with no dependents. The following deductions are made each week: $31.00 for federal tax; 6.45% for Social Security and 1.45% for Medicare; $42.50 for medical insurance. The state tax rate is 1.5% of gross. What is Erika’s net pay?

A. $543.96

B. $550.76

C. $612.09

D. $676.69

10. ALGEBRA The deductions from Allana Cole’s monthly pay are federal income tax of $98, state income tax of 2.1%, city income tax of 1.1%, Social Security of 6.45%, and Medicare of 1.45%. Her monthly net pay is $2,754.80. Find Allana’s monthly gross pay.

A. $2,900

B. $3,200

C. $3,500

D. $4,000

End of

Chapter 2Net Income

Take-Home Pay The deductions taken out of your paycheck help support schools, roads, national parks, and more. Why do you think you have to pay taxes?

Documents

answer slide

annual tax withheld

federal tax tables

state income tax rate

state tax rate

income range

percent of taxable income

taxable wages tax rate