Paycheck Deductions

Show your work for each problem.

1.
Which term describes the total amount you earn BEFORE any deductions?
1. a)Net Pay
2. b)Take-home Pay
3. c)Deductions
4. d)Gross Pay
Answer: Gross Pay
Gross pay is the total amount earned before any deductions. Net pay (or take-home pay) is what remains after deductions.
2.
Which of these is a MANDATORY paycheck deduction?
1. a)Social Security tax
2. b)Union dues
3. c)401k retirement contribution
4. d)Health insurance premium
Answer: Social Security tax
Social Security tax is mandatory - it's required by law. The other options (401k, health insurance, union dues) are optional deductions that you choose to have.
3.
If your gross pay is 1000 dollars and total deductions are 250 dollars, what is your net pay in dollars?
Answer: 750
Net pay = Gross pay - Deductions = . Your take-home pay is 750 dollars.
4.
Calculate the Social Security tax (6.2%) on a gross pay of 2000 dollars. Round to the nearest dollar.
Answer: 124
Social Security tax = . The deduction is 124 dollars.
5.
Lisa's gross pay is 3500 dollars. Her deductions are: Social Security (6.2%), Medicare (1.45%), Federal Tax (12%). What is her net pay?
1. a)2707.75 dollars
2. b)2812.25 dollars
3. c)2892.50 dollars
4. d)3000.00 dollars
Answer: 2812.25 dollars
Social Security: . Medicare: . Federal Tax: . Total deductions: . Net pay: dollars.
6.
Mark's gross pay is 4000 dollars and his net pay is 3000 dollars. What percentage of his pay goes to deductions?
Answer: 25
Total deductions: . Percentage: .
7.
Emma earns 2800 dollars gross per month. Calculate her net pay if: Social Security is 6.2%, Medicare is 1.45%, Federal Tax is 15%.
Answer: 2166.20
1. Calculate the Social Security deduction (6.2% of 2800) 173.60
2. Calculate the Medicare deduction (1.45% of 2800) 40.60
3. Calculate the Federal Tax deduction (15% of 2800) 420
4. What is the total of all deductions? 634.20
5. What is Emma's net pay? 2165.80
8.
A job pays 48000 dollars per year. With 22% total deductions, what is the monthly net pay? Round to the nearest dollar.
Answer: 3120
Monthly gross: . Net pay: dollars.
9.
You want a net pay of at least 2500 dollars per month. If total deductions are 20%, what minimum gross pay do you need?
Answer: 3125
1. What percentage of gross pay do you keep after 20% deductions? 80
2. Write this as a decimal 0.80
3. Set up the equation: Net = Gross x 0.80. Solve for Gross if Net = 2500 3125
10.
Job A offers 5000 dollars gross with 22% deductions. Job B offers 4500 dollars gross with 15% deductions. Which has higher net pay and by how much?
1. a)They are equal
2. b)Job A by 75 dollars
3. c)Job A by 125 dollars
4. d)Job B by 75 dollars
Answer: Job A by 75 dollars
Job A: . Job B: . Job A is higher by dollars.
11.
If your annual gross salary is 60000 dollars and your annual net is 45000 dollars, what is your effective deduction rate as a percentage?
Answer: 25
Deductions: . Rate: .
12.
You earn 20 dollars per hour and work 40 hours per week. Calculate your monthly net pay if total deductions are 24%. (Assume 4 weeks per month)
Answer: 2432
1. What is your weekly gross pay? (hourly rate times hours) 800
2. What is your monthly gross pay? (weekly times 4) 3200
3. What amount is deducted? (monthly gross times 0.24) 768
4. What is your monthly net pay? (gross minus deductions) 2432
13.
Compare two job offers: Job A pays 55000 dollars/year with benefits costing 200 dollars/month out of pocket. Job B pays 50000 dollars/year with benefits included. Both have 23% tax deductions. Which has higher annual net income?
Answer: Job A
1. Calculate Job A's annual net after 23% tax (55000 x 0.77) 42350
2. Calculate Job A's annual out-of-pocket benefit costs (200 x 12) 2400
3. Calculate Job A's final annual net income 39950
4. Calculate Job B's annual net after 23% tax (50000 x 0.77) 38500
5. Which job has higher net income? (Enter Job A or Job B) Job A
14.
Why should you budget based on net pay instead of gross pay?
1. a)Net pay is what you actually receive to spend
2. b)Gross pay is always lower
3. c)Net pay never changes
4. d)Deductions are optional
Answer: Net pay is what you actually receive to spend
Net pay is what you actually receive after all deductions. This is the money you can actually spend, so it's what you should base your budget on.
15.
Your biweekly gross pay is 1800 dollars. With 21% total deductions, what is your monthly net pay? (Assume 2 pay periods per month)
Answer: 2844
Biweekly net: . Monthly net: dollars.
16.
You contribute 6% of your gross pay to a 401k (pre-tax). Your gross is 5000 dollars. After the 401k contribution, you pay 20% tax on the remaining amount. What is your net pay?
Answer: 3760
1. What is your 401k contribution? (6% of 5000) 300
2. What is your taxable income after 401k? (5000 minus 401k) 4700
3. What is your tax amount? (20% of taxable income) 940
4. What is your net pay? (taxable minus tax) 3760