Chapter 2, section 2-5

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# Chapter 2, section 2-5 - PowerPoint PPT Presentation

Chapter 2, section 2-5. Analyze Take-Home Pay. I can…. Calculate take-home pay as a % of gross pay. Calculate the impact of a raise on take-home pay. Calculate potential tax savings of a cafeteria plan. So what % of my gross pay do I actually get to take home?.

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### Chapter 2, section 2-5

Analyze Take-Home Pay

I can…
• Calculate take-home pay as a % of gross pay.
• Calculate the impact of a raise on take-home pay.
• Calculate potential tax savings of a cafeteria plan.
So what % of my gross pay do I actually get to take home?
• Step 1: Add up all deductions (taxes, insurance, etc)
• Step 2: Subtract deductions from gross pay
• Step 3: Calculate the % by dividing

Gross pay-deductions

Gross pay

• Example 1, p. 64
• Check your understanding A & B
How does a raise impact my gross pay?
• Raises can be expressed as an increase in a dollar amount per hour, per pay period

OR

• An increase per year

OR

• As a % of the current gross pay
• When you get a raise it also impacts your deductions. When you make more money…more money comes out for taxes!
• Example 2, p. 65
• Check your understanding C & D
What’s a cafeteria plan?
• It’s really called a Section 125 plan. It’s nicknamed a cafeteria plan because employees can choose which items they want to participate in—much like a lunch line in the cafeteria.
So what’s the purpose of a cafeteria plan?
• It allows employees to deduct a certain amount of money from their wages before it’s taxed!
• By doing so this lowers the amount of your taxable income. Lower taxable income = lower taxes!
What types of things can you deduct with pre-tax dollars?
• Health or life insurance premiums
• Child care
• Healthcare expenses (doctor visit co-pays, prescriptions, OTC drugs)
• Example 3, p. 66
• Check your understanding E & F