Business Math
2.1 Deductions from the Gross Pay
Goals
• Find federal withholding tax deductions• Calculate social security and Medicare tax
deductions• Calculate total deductions and net pay
Start up
• Janice is single and has just graduated from community college. She needs at least $480 each week to pay for her rent and other living expenses to afford to live alone. Is she earns $13 an hour and works 40 hours per week, will she earn enough to pay her living expenses.
• Math Builder page 40
Federal withholding tax deduction
• Deductions – are subtracted from gross pay• Withholding taxes- also called income tax is taken out of
gross pay for the federal government and sometime for the state and local governments.
• The amount of withholding tax depends on the worker’s wage, marital status and number of withholdings claimed.
• Withholding allowance is used to reduce the tax withheld. The worker can claim one withholding allowance for themselves, another for their spouse and one for each child or dependent.
• See table on page 41
Social security and Medicare tax deduction
• FICA – Federal Insurance contribution Act – Disability benefits– Medicare– Retirement Benefits– Survivor’s benefits
• The overall tax used in the book is 7.65%– Social Security is 6.2% (up to $80,400)– Medicare is 1.45%
Total Deduction and Net Pay
• Gross pay – deductions = net pay• Wrap Up• Team Meeting – page 44