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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?.

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Chapter 2 section 2 5

Chapter 2, section 2-5

Analyze Take-Home Pay


I can
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
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
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
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
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
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


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