Taxes & paychecks
Read a sample pay statement and distinguish gross from take-home pay.
Start with the idea
A pay statement may show gross pay, deductions, and net (take-home) pay. Tax withholding is a prepayment toward taxes; it is not the final tax calculation. A person’s final tax liability depends on their situation and applicable rules. Use current official sources for tax questions.
Key takeaways
- Gross pay is what you earn; net pay is what you take home.
- FICA (Social Security and Medicare) is generally 7.65% of wages for employees.
- Form W-4 tells your employer how much federal income tax to withhold.
- Filing a return settles the difference between withholding and actual tax owed.
By the end you can…
- Identify gross pay and net pay
- Recognize common paycheck deductions
- Distinguish withholding from final tax liability
Source: Internal Revenue Service, Tax withholding; irs.gov/individuals/tax-withholding-estimator.
Vocabulary flashcards
Paycheck estimator
Estimate gross pay, FICA, withholding, and take-home pay.
| Gross pay | $600.00 |
|---|---|
| Social Security + Medicare (FICA 7.65%) | −$45.90 |
| Federal income tax withholding | −$30.00 |
| State income tax withholding | −$18.00 |
| Net (take-home) pay | $506.10 |
Simplified estimate. Actual withholding depends on your W-4, filing status, and current tax rules; many teens with low income owe little or no federal income tax and may get withholding back by filing. See irs.gov.
Check your understanding
Question 1 of 3
Printable activity
Use this with the physical kit, in a group, or on your own.
- Label gross pay, deductions, and net pay on a fictional statement.
- Discuss why withholding and final tax liability are different.
Reflection: What would you want to know before making this choice in real life?
Practice questions
- A fictional paycheck shows $500 gross pay and $60 in deductions. What is the take-home pay shown?
- $440
- $500
- $560
- Alex earns $400 gross in a week. About how much is withheld for FICA at 7.65%?
- $7.65
- $30.60
- $76.50
- What does a tax refund usually mean?
- Free bonus money from the government
- More was withheld or paid during the year than was owed
- Your employer made a mistake