Question

Assume your gross pay per pay period is $2,000 and you are in the 33 percent tax bracket. Calculate your net pay and spendable income if you save $200 per pay period after paying income tax on $2,000. (Do not round intermediate calculations.)

Answer 1

Based on your gross pay per period, and the tax bracket you are in, your net pay would be $1,340. Your spendable income would be $1,140.

What is your net pay?

Seeing as you are in the 33 percent tax bracket, you will have a net pay that can be calculated as:

= Gross pay - (Gross pay x Tax rate)

Solving gives:

= 2,000 - (2,000 x 33%)

= 2,000 - 660

= $1,340

This means that the net income you receive after paying your income tax is $1,340.

What is your spendable income?

Your spendable income can be found as the net pay your receive less the savings you plan to make.

The spendable income is therefore:

= Net pay - Prospective savings

Solving gives:

= 1,340 - 200

= $1,140

In conclusion, the spendable income is $1,140.

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