Understanding Deductions Worksheet
This worksheet helps Grade 11 students understand various types of deductions, their impact on taxable income, and how to calculate net pay.
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Understanding Deductions
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Date:
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Read each question carefully and answer to the best of your ability. Show all your work where applicable.
1. Which of the following is NOT typically considered a mandatory payroll deduction?
Federal Income Tax
Social Security Tax
Health Insurance Premiums
State Income Tax
2. What is the primary purpose of income tax deductions?
To increase your gross pay
To reduce your taxable income
To pay for optional benefits
To fund retirement accounts only
1. Gross pay is the amount an employee receives after all deductions are subtracted.
True
False
2. A tax credit directly reduces the amount of tax you owe, dollar for dollar.
True
False
1. The amount an employee earns before any deductions is called .
2. FICA taxes include contributions to Social Security and .
3. A deduction that is taken out of every paycheck and is required by law is a deduction.
1. Explain the difference between a tax deduction and a tax credit. Provide an example of each.
Scenario: Sarah earns a gross bi-weekly salary of $2,500. Her deductions are as follows:
- Federal Income Tax: $350
- State Income Tax: $120
- Social Security Tax: 6.2% of gross pay
- Medicare Tax: 1.45% of gross pay
- Health Insurance Premium: $80
Calculate Sarah's net pay for this bi-weekly period. Show all your calculations.