Deductions and Net Pay - Grade 10 Math

deductions.notebookApril 04, 2013Deductions and Net Pay1

deductions.notebookApril 04, 2013• Net Income:• This is the amount made AFTER deductions are taken offfor a variety of things (EI, CPP, RRSP, income tax…)• Also called “take-home” pay.2

deductions.notebookApril 04, 2013CPP – Canadian Pension Plan• Provides you with a pension when you retire• Both you and your employer contribute thesame amount each paycheque.• The 2013 Contribution Rate is 4.95% ofeveryone’s gross annual income.3

deductions.notebookApril 04, 2013CPP Example and Yearly Max• 2013 Contribution Rate - 4.95% of gross annualincome• Example:• If your annual salary is $65,000, how much willyou contribute to CPP over the year?• $65,000 x 0.0495 = $3217.50/yr• However, the federal government sets a limit ofhow much CPP they can take: In 2013 the max CPPwas $2,356.20.4

deductions.notebookApril 04, 2013EI Premium• Employment Insurance Premium• The government collects 1.4 times from youremployer as from you. So if you contributed$1.00, your employer would contribute $1.40.• In the year 2013:• EI Rate is 1.88% of an employee’s GROSS income5

deductions.notebookApril 04, 2013Example#1• If Tara's gross earnings are $12 987.00 how muchwill she pay in CPP? (rate of 4.95%)• What is Tara’s net earnings?6

deductions.notebookApril 04, 2013Example#2• If Brandon’s gross earnings are $3 876.00 howmuch will he pay in EI? (rate 1.88%)• How much in CPP? (4.95%)• What is his net earnings?7

deductions.notebookApril 04, 2013Federal Tax: this is paid only once on yourincome tax formFederal tax rates for 2013 are:• 15% on the first $43,561 of taxable income, +• 22% on the next $43,562 of taxable income (onthe portion of taxable income over $43,561 up to$87,123), +• 26% on the next $47,931 of taxable income (onthe portion of taxable income over $87,123 up to$135,054), +• 29% of taxable income over $135,054.8

deductions.notebookApril 04, 2013• 2. If your short-term disability insurance rate is0.5%, what do you pay if your paycheque is$300.00?• $300.00 x 0.005• = $1.50 would be paid9

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deductions.notebookApril 04, 2013• 3. If your Canada Pension Plan (CPP) contributionrate is 4.95% and your salary is $1578.00 everytwo weeks, what will be the CPP deduction?• $1578.00 x 0.0495• = $78.11 deduction11

deductions.notebookApril 04, 2013• 4. Samara’s monthly taxable income was$3276.54. If she paid $757.24 in taxes, whatpercentage of her taxable income did she pay?• $757.24 ÷ $3276.54• =0.2311• =0.2311 x 100• =23.11%12

deductions.notebookApril 04, 2013• 5. Randy works at two jobs. In one job, he earns$325.00/week, and had deductions of $56.67federal tax, $13.12 provincial tax, $16.09 CPP, and$4.14 EI. At his other job, he earns $567.00/weekand pays $79.42 federal tax, $16.82 provincialtax, and $18.12 CPP. What is his net income?13

deductions.notebookApril 04, 2013Challenge:• 6. As a part-time college instructor, Kathy teachesan introductory course on Mexican history. She hasa biweekly gross income of $3654.75. Her beforetaxdeductions include a short-term disabilitypremium of 0.5%, union dues of 3.1% and a pensionamount of 4%. If she pays federal tax at a rate of18.5%, provincial tax at a rate of 6.2%, CPP at4.95% and EI at 2.2%, what is her net income?14

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