2.1 Deductions from the Gross Pay 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