Question

You (or your parents) earn $53,698.00/yr and you have deductions of FICA (7.65%), federal tax withholding (11.5%), and state tax withholding (9%). How much is the allowed housing expense for the year? Round any decimals to the nearest penny.

Answer 1

To find the allowed housing expense for the year, we first need to calculate your take-home pay after all the deductions. Here's how you can do that step by step:

1. Calculate the total deductions based on your annual income.

**Total annual income:** $53,698.00

**FICA deduction (7.65%):**
\[
\text{FICA} = 53,698 \times 0.0765 = 4,103.69
\]

**Federal tax withholding (11.5%):**
\[
\text{Federal Tax} = 53,698 \times 0.115 = 6,169.77
\]

**State tax withholding (9%):**
\[
\text{State Tax} = 53,698 \times 0.09 = 4,831.82
\]

2. Now, sum up the deductions:
\[
\text{Total Deductions} = \text{FICA} + \text{Federal Tax} + \text{State Tax}
\]
\[
\text{Total Deductions} = 4,103.69 + 6,169.77 + 4,831.82 = 15,105.28
\]

3. Next, calculate your take-home pay:
\[
\text{Take-home Pay} = \text{Annual Income} - \text{Total Deductions}
\]
\[
\text{Take-home Pay} = 53,698 - 15,105.28 = 38,592.72
\]

4. Now, the allowed housing expense typically is a percentage of your take-home pay. A common guideline suggests that around 30% of your take-home pay can be allocated to housing expenses. Let's calculate that:
\[
\text{Allowed Housing Expense} = \text{Take-home Pay} \times 0.30
\]
\[
\text{Allowed Housing Expense} = 38,592.72 \times 0.30 = 11,577.82
\]

Therefore, the allowed housing expense for the year is **$11,577.82**.