The average American wants to share as little of his or her earnings with Uncle Sam. How does the saying go? *Don’t tax you. Don’t tax me. Tax that man behind the tree.* Gnawing on a worker’s wages, income tax is an everyday example of **percent decrease** at work. This article focuses on using percents to calculate **disposable income**, the amount of money that remains after paying federal income tax.

## How to Calculate Income Tax

When you get that first real job and learn that you’ll have an annual salary of $36,000, realize that you don’t have $3,000 a month to spend.

Let’s say that your income tax rate will be 5%. What will be your disposable income?

1. Find the amount of taxes that you’ll pay.

36,000 * .05 = $1,800

2. Subtract the amount of taxes from your income.

$36,000 – $1,800 = $34,200

Disposable Income: $34,200

Disposable Income per Month: $34,200/12 = $2,850

Don’t run out and get a mortgage and car note that total $2,500 a month. Otherwise, you will be the hungriest person living the American Dream.

## Exercises

Answers and Explanations

Use each annual salary and tax rate to calculate disposable income.

1. Annual salary: $350,000

Federal income tax rate: 28%

Disposable income:

2. Annual salary: $10,000

Federal income tax rate: 5%

Disposable income:

3. Annual salary: $80,500

Federal income tax rate: 10%

Disposable income:

4. Annual salary: $175,000

Federal income tax rate: 23%

Disposable income:

5. Annual salary: $50,400

Federal income tax rate: 10%

Disposable income:

6. Annual salary: $93,550

Federal income tax rate: 18%

Disposable income:

7. Annual salary: $27,950

Federal income tax rate: 5%

Disposable income: