Skill: Calculate gross and net income

Gross income is the total amount earned before any deductions. Net income is the amount you take home after deductions.

Example

Jordan earns $18 per hour and works 35 hours this week. The deductions are:

• Taxes: 12% of gross pay
• Retirement contribution: 5% of gross pay
• Insurance: $40

Step 1: Calculate gross income

Multiply the hourly rate by the hours worked:

$$\text{Gross income} = 18 \times 35 = \$630$$

Jordan’s gross income is $630.

Step 2: Calculate the percentage deductions

Taxes:

$$0.12 \times 630 = \$75.60$$

Retirement contribution:

$$0.05 \times 630 = \$31.50$$

Step 3: Add all deductions

Include the fixed insurance deduction:

$$75.60 + 31.50 + 40 = \$147.10$$

Total deductions are $147.10.

Step 4: Calculate net income

Subtract total deductions from gross income:

$$\text{Net income} = 630 - 147.10 = \$482.90$$

Jordan’s gross income is $630**, and the **net income, or take-home pay, is$482.90.