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In the United States, the average single worker has a net average tax rate of 22.4

% in 2020
, compared with the Organization of Economic Cooperation and Development (OECD) average of 24.8
%. In other words, in the United States, the take-home pay of an average single worker, after tax and benefits, was 77.6
% of their gross wage, compared with the OECD average of 75.2
%.” (Google)

In this scenario, use 20
% as the payroll tax deduction.

1. How much will the monthly take-home (net) pay be?

2. Input this number on the Excel Personal Budget spreadsheet as the monthly income.

1 answer

To calculate the monthly take-home (net) pay of an average single worker in the United States, we can follow these steps:

  1. Determine Gross Wage: Since the specific gross wage isn't provided, let's assume a hypothetical gross monthly wage for illustration purposes. For instance, let’s consider the gross monthly wage as $5,000.

  2. Calculate Deductions:

    • Payroll Tax Deduction: This is a 20% deduction from the gross wage.
    • Net Income Calculation: The net income after deductions can be calculated using the net average tax rate of 22.4% as follows:

Step-by-Step Calculation:

  1. Calculate Payroll Tax Deduction: \[ \text{Payroll Tax} = \text{Gross Wage} \times 0.20 \] \[ = 5000 \times 0.20 = 1000 \]

  2. Calculate Total Deductions: For simplicity, let's keep the only deduction as the payroll tax. \[ \text{Total Deductions} = 1000 \]

  3. Calculate Take-Home Pay (Net Pay): \[ \text{Net Pay} = \text{Gross Wage} - \text{Total Deductions} \] \[ = 5000 - 1000 = 4000 \]

Summary:

  1. Monthly Gross Wage: $5,000
  2. Monthly Take-Home (Net) Pay: $4,000

Input into Excel Personal Budget Spreadsheet:

  • You would input $4,000 as the monthly income in the Excel Personal Budget spreadsheet.

Additional Notes:

If you have a different gross wage in mind, simply replace the $5,000 with your gross wage in the calculations above to find the corresponding monthly take-home pay.