Chapter 2 Understanding Your Paycheck
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Step 5: Determine the amount of tax due on the taxable income over $36,000.
partial tax due = 0.06 × taxable income over $36,000
partial tax due = 0.06 × $7,350.52
partial tax due = $441.03
Step 6: Determine the total state income tax by adding the tax due to the base
rate in the formula.
total state income tax = $960 + partial tax due
total state income tax = $960 + $441.03
total state income tax = $1,401.03
Check It
Cassandra’s neighbor, Fernando, is a photographer who earns an annual
gross pay of $35,980. What is Fernando’s total fl at-rate state income tax?
Net Pay
Net pay is the fi nal calculated amount of a paycheck after federal taxes, FICA
taxes, and state taxes are withheld. Net pay is sometimes called take-home pay,
because it is the portion of your earnings that you can take home. Figure 2-5 is an
example of a paycheck stub, which is also known as an earnings statement.
Use the following formula to calculate net pay:
net pay = gross pay – (federal tax withholdings + Social Security tax +
Medicare tax + state income tax withholdings)
Figure 2-5.
Paycheck Stub
Employee:
Joe Park
225 West Second Street
Frankfort, KY 40601-0225
Date:
6/24/-- Jake’s Skateboards
82 Hudson Hollow Road
Frankfort, KY 40601-0082
Gross Pay
Fed. Income
Tax Withheld
State Income
Tax Withheld
FICA
Tax Withheld
Medicare
Tax Withheld Net Pay
$345.00 $18.06 $13.80 $21.39 $5.00 $286.75
Gross Pay
Year-to-Date
Federal
Year-to-Date
State
Year-to-Date
FICA
Year-to-Date
Medicare
Year-to-Date
Net Pay
Year-to-Date
$8,484.50 $444.16 $339.38 $526.04 $123.03 $7,051.89