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Take-Home Pay

Learn about federal and state income tax, Social Security, Medicare, group insurance deductions, and calculating net pay. Practice scenarios included.

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Take-Home Pay

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  1. 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?

  2. Lesson Objective Determine the amount withheld for federal income tax. Content Vocabulary federal income tax Money withheld by an employer from an employee’s paycheck to pay federal government taxes. withholding allowance The number of people an employee supports, which helps employers know how much money to withhold for federal income tax. • federal income tax • withholding allowance

  3. Lesson Objective Compute state taxes on a straight percent basis. Content Vocabulary exemption Withholding allowances, which allow for supporting yourself, your spouse, and others in your family who are your dependents. • exemption

  4. Lesson Objective Determine state taxes on a graduated income tax basis. Content Vocabulary graduated income tax A system that increases the tax rate at different levels of income. • graduated income tax

  5. Lesson Objective Compute the amount withheld for Social Security and Medicare taxes. Content Vocabulary Social Security A federal government program to pay for retirement and disability benefits. Medicare A federal government program to provide medical insurance. • Social Security • Medicare

  6. Lesson Objective Calculate the deduction for group insurance. Content Vocabulary Social Security A federal government program to pay for retirement and disability benefits. group insurance Health insurance offered by many businesses to employees, pain in part by the business and in part by the employee. • group insurance

  7. Lesson Objective Calculate net pay per pay period. Content Vocabulary 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

  8. Summary Federal Income Tax State Income Tax Types of Agencies Group Health Insurance is often less expensive than individual insurance. Social Security pays for retirement and disability benefits. Pay Deductions Your employer takes deductions from your paycheck for the government and other agencies.

  9. 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? • $14.00 • $15.00 • $19.00 • $20.00

  10. 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? • $450.00 • $1,230.90 • $1,462.50 • $1,912.50

  11. 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. • $85,400 • $101,250 • $125,600 • $132,000

  12. 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. • $1,009.85 • $1,066.20 • $1,213.20 • $1,430.85

  13. 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? • $336.82 • $356.59 • $511.85 • $575.60

  14. 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? • $34.08 • $47.00 • $58.75 • $65.90

  15. 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? • $100.90 • $120.83 • $280.50 • $362.50

  16. 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? • $2,779.20 • $3,843.10 • $4,275.69 • $5,904.33

  17. 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? • $543.96 • $550.76 • $612.09 • $676.69

  18. 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. • $2,900 • $3,200 • $3,500 • $4,000

  19. End of Chapter 2 Net Income

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