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.

Answer 1

After-tax saving method

Gross Pay (Tax)=Net Pay

$2,000 $(660)= $1,340

Spendable Income $1,340 -$200= $1,140

]The term "spendable income" is used to describe the sum of money left over after tax payments have been made. When all bills and expenses have been covered, what's left over is a person or family's discretionary income, which can be used toward future goals like investing, saving, or spending. You can spend your discretionary funds because of the money you have available to you.

When calculating your disposable income, how do you account for taxation? It is your spendable income, from which you subtract necessary living expenses, that serves as the basis for your discretionary income.

Consider your take-home pay once taxes have been deducted as an illustration of your discretionary income. The term "discretionary income" refers to the amount of money left over after obligatory expenses have been met. These include but are not limited to rent or mortgage, student loan payments, utility bills, and groceries.

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