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Chapter 2, section 2-5

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

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  1. Chapter 2, section 2-5 Analyze Take-Home Pay

  2. 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.

  3. 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

  4. 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

  5. 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.

  6. 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!

  7. 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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