Question

If income tax for a certain student is 23%, how much gross pay does that student need to earn to be able to keep $250? (Assume no other deductions.)

a) $325
b) $325.97
c) $324.68
d) $326.84

Answer 1

To find the gross pay required to keep $250 after a 23% tax, divide the net pay by 1 minus the tax rate, which results in $324.68.

Step-by-step explanation:

The question is asking to calculate the amount of gross pay a student needs to earn to keep $250 after paying an income tax of 23%. To solve this, we use the following formula:

Gross Pay = Net Pay / (1 - Tax Rate)

Where:

• Net Pay is the amount the student wants to keep, which is $250.
• The Tax Rate is 23% or 0.23 in decimal form.

Plugging the values into the formula:

Gross Pay = $250 / (1 - 0.23)

Gross Pay = $250 / 0.77

Gross Pay = $324.68 (after rounding to the nearest cent)

Therefore, the correct answer is c) $324.68.