Taxes and insurance aren’t the only things deducted from your gross pay. Union dues, state tax, and local tax might also be deducted. An earnings statement lists your gross pay, all your deductions, and your net pay for each pay period. (Note: Use the Social Security tax rate of 6.2 percent on the first $90,000 earned, the Medicare tax rate of 1.45 percent on all earnings, and the tax tables on pages 170–173 for federal income tax.)

Net Pay = Gross Pay – Total Deductions

Example

Find the net pay.
Isaac Reiser’s gross weekly salary is $515. He is single and claims one allowance. The state tax is 2.8 percent of gross pay with no personal exemption allowances. Reiser also participates in his employer’s medical insurance plan, which costs him $16.83 per week. What is his net pay for the weekly pay period?

1. Find his total deductions.
   a. Federal income tax: $54.00
   b. Social Security: $515 x 0.062 = $31.93
   c. Medicare: $515 x 0.0145 = $7.47
   d. State tax: $515 x 0.028 = $14.42
   e. Medical insurance: $16.83
   Total Deductions $54.00 + $31.93 + $7.47 + $14.42 + $16.83 = $124.65
2. Find his net pay
   Gross Pay – Total Deductions
   $515.00 – $124.65 = $390.35 net pay

Practice

Find the net pay.

1. Serena Masters is single and claims 1 allowance. Her gross weekly pay is $440.00. Each week, she pays federal, Social Security, and Medicare taxes, $14.40 for medical insurance, and $10.00 for union dues.
2. Dustin Ambrose is married and claims 3 allowances. His gross weekly pay is $628.00. Each week, he pays federal, Social Security, and Medicare taxes, $52.00 for medical insurance, and $23.50 toward his retirement fund.
3. Andre Quinn earns $600 per week. He is married and claims 2 allowances. Weekly deductions include federal, Social Security, and Medicare taxes, a state tax of 2.5 percent on gross earnings, a local tax of 1 percent on gross earnings, and medical insurance. The company pays 65 percent of the $3,975 annual medical cost
4. Standardized Test Practice: Barbara Brach earns $492.00 per week. She is single and claims 1 allowance. Her state tax rate is 2.8 percent, and her local tax rate is 1.25 percent, both on gross earnings. Her medical insurance plan costs $2,550.00 per year, of which the company pays 70 percent. Medicare and Social Security are also deducted from her paycheck. What is her net pay?
   A. $331.10       B. $348.74       C. $388.36       D. $368.73

 

(source) – edited for correctness