Question

Assume your gross pay per pay period is $3,800.00 and you are in the 28 percent tax bracket. Calculate your net pay and spendable income if you save $380.00 per pay period in a tax-sheltered annuity.

Answer 1

To calculate the net pay, subtract the tax amount from the gross pay. The spendable income is the net pay minus the amount saved in the tax-sheltered annuity.

Step-by-step explanation:

To calculate the net pay, we need to subtract the tax amount from the gross pay. Since the individual is in the 28 percent tax bracket, the tax amount would be 28% of the gross pay. The formula to calculate the tax amount is: Tax Amount = Gross Pay x Tax Rate. Therefore, the tax amount would be $3,800.00 x 28% = $1,064.00,

Now, to calculate the net pay, we subtract the tax amount from the gross pay: Net Pay = Gross Pay - Tax Amount = $3,800.00 - $1,064.00 = $2,736.00

Next, to calculate the spendable income, we subtract the amount saved in the tax-sheltered annuity from the net pay: Spendable Income = Net Pay - Amount Saved = $2,736.00 - $380.00 = $2,356.00

Therefore, the net pay is $2,736.00 and the spendable income is $2,356.00.