CareersCareers

Take-Home PayTake-Home Pay

Housing and Vehicle Housing and Vehicle AllowanceAllowance

B1: Gross Annual IncomeB1: Gross Annual Income

GrossGross means “before withholding, means “before withholding, etc.”etc.”

I will provide each of you with the I will provide each of you with the gross annual income for your job.gross annual income for your job.

B2: Personal Tax B2: Personal Tax Exemption/DeductionExemption/Deduction

In simple terms, you are allowed a In simple terms, you are allowed a $3650 exemption for each person in $3650 exemption for each person in your household.your household.

You are also allowed a $5700 standard You are also allowed a $5700 standard deduction, unless you choose to deduction, unless you choose to itemize deductions for expenses like itemize deductions for expenses like student loan interest, mortgage student loan interest, mortgage interest, charitable contributions, etc.interest, charitable contributions, etc.

For this class, enter $9350 in cell B2For this class, enter $9350 in cell B2

B3: Taxable IncomeB3: Taxable Income

Your taxable income is what remains Your taxable income is what remains after your exemptions and after your exemptions and deductions have been subtracted deductions have been subtracted from your income.from your income.

Formula for B3: Formula for B3:

=B1-B2=B1-B2

Federal Tax BracketsFederal Tax Brackets

People with different incomes are People with different incomes are taxed at different rates.taxed at different rates.

Your taxable income will determine Your taxable income will determine which tax bracket you fall into.which tax bracket you fall into.

Different tax brackets have different Different tax brackets have different rates of taxation.rates of taxation.

Federal Tax BracketsFederal Tax BracketsTax Bracket FloorTax Bracket Floor Tax Bracket CeilingTax Bracket Ceiling

$0$0 $8,350$8,350

$8,350$8,350 $33,950$33,950

$33,950$33,950 $82,250$82,250

$82,250$82,250 $171,550$171,550

$171,550$171,550 $372,950$372,950

$372,950$372,950 No ceilingNo ceiling

Federal Tax BracketsFederal Tax Brackets

Tax Bracket FloorTax Bracket Floor Tax BracketTax Bracket

$0$0 10%10%

$8,350$8,350 15%15%

$33,950$33,950 25%25%

$82,250$82,250 28%28%

$171,550$171,550 33%33%

$372,950$372,950 35%35%

Federal Tax BracketsFederal Tax Brackets

All income that you earned above All income that you earned above the floor for your tax bracket will be the floor for your tax bracket will be taxed at this percentage.taxed at this percentage.

At one time, the highest tax bracket At one time, the highest tax bracket was taxed at 90%. Now, the highest was taxed at 90%. Now, the highest bracket is only taxed at 35%.bracket is only taxed at 35%.

B4: Federal Income TaxB4: Federal Income Tax

This is the total amount of income tax you This is the total amount of income tax you will owe to the federal government.will owe to the federal government.

Remember that you have money withheld Remember that you have money withheld from your paycheck to roughly cover your from your paycheck to roughly cover your tax bill.tax bill.

If you had more withheld than you owe, If you had more withheld than you owe, you will you will receive a refundreceive a refund..

If you had less withheld than you owe, If you had less withheld than you owe, you will have to you will have to pay the IRS the pay the IRS the differencedifference..

B4: Total Federal Income B4: Total Federal Income TaxTax

You will determine your federal You will determine your federal income tax using a web site income tax using a web site calculator. Enter the result in cell calculator. Enter the result in cell B4.B4.

B5: South Carolina State B5: South Carolina State TaxTax

The state also has tax rates that vary The state also has tax rates that vary with your tax bracket, from 2.5% to with your tax bracket, from 2.5% to a maximum of 7%a maximum of 7%

The South Carolina tax tables will be The South Carolina tax tables will be used to calculate your value for B5.used to calculate your value for B5.

B6: FICA taxB6: FICA tax

FICA tax is withheld at a rate of FICA tax is withheld at a rate of 6.2% of your taxable income.6.2% of your taxable income.

Formula for B6:Formula for B6:

=B3*0.062=B3*0.062

B7: Medicare taxB7: Medicare tax

Medicare tax is withheld at a rate of Medicare tax is withheld at a rate of 1.45% of your taxable income.1.45% of your taxable income.

Formula for B7:Formula for B7:

=B3*0.0145=B3*0.0145

B8: Total Taxes and B8: Total Taxes and WithholdingWithholding

This is the sum of the federal income tax This is the sum of the federal income tax (B4), state income tax (B5), FICA tax (B4), state income tax (B5), FICA tax (B6), and Medicare tax (B7).(B6), and Medicare tax (B7).

Formulas for B8:Formulas for B8:

=(B4+B5+B6+B7)=(B4+B5+B6+B7)

or or

=sum(b4:b7)=sum(b4:b7)

B9: Annual Take-Home B9: Annual Take-Home PayPay

Your “take-home pay” is what is left Your “take-home pay” is what is left over after withholding.over after withholding.

Formula for B9:Formula for B9:

=B1-B8=B1-B8

B10: Monthly Take-B10: Monthly Take-Home PayHome Pay

This is what your monthly paycheck This is what your monthly paycheck will be after taxes and withholding.will be after taxes and withholding.

The monthly take-home pay is the The monthly take-home pay is the yearly take-home pay split up over yearly take-home pay split up over 12 months.12 months.

Formula for B10:Formula for B10:

=B9/12=B9/12

B11: Maximum Housing B11: Maximum Housing ExpenseExpense

When considering you for a mortgage, When considering you for a mortgage, banks will look at your total monthly banks will look at your total monthly income, as well as all other debts you income, as well as all other debts you have (student loans, car loans, credit have (student loans, car loans, credit card debt, etc.)card debt, etc.)

Banks often will only lend enough Banks often will only lend enough money so your mortgage payment (plus money so your mortgage payment (plus property taxes and insurance) will not property taxes and insurance) will not be more than 30% of your be more than 30% of your gross gross monthly income.monthly income.

B11: Maximum Housing B11: Maximum Housing ExpenseExpense

Formula for B11:Formula for B11:

=(B1/12)*0.3=(B1/12)*0.3

B12: Maximum Car B12: Maximum Car ExpenseExpense

Formula for B12:Formula for B12:

=(B1/12)*0.12=(B1/12)*0.12

B13: Mortgage AllowedB13: Mortgage Allowed

Based on your maximum housing Based on your maximum housing expense, you will use a web site to expense, you will use a web site to calculate the mortgage you can receive.calculate the mortgage you can receive.

The columns list different mortgage The columns list different mortgage amounts based on different down amounts based on different down payments.payments.

You will use the column that reflects a You will use the column that reflects a 10% down payment.10% down payment.

Enter the result from the calculator in cell Enter the result from the calculator in cell B13.B13.

B14: Car Loan AllowedB14: Car Loan Allowed

Based on your maximum car Based on your maximum car expense, you will use a web site to expense, you will use a web site to calculate the car loan you can calculate the car loan you can receive.receive.

You will apply for a 5-year loan with You will apply for a 5-year loan with a $2,000 down payment. Currently, a $2,000 down payment. Currently, rates for this loan are 6.45%.rates for this loan are 6.45%.

Enter the result from the calculator Enter the result from the calculator in cell B14.in cell B14.