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.

### 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: $252,000

Find the amount of taxes that you’ll pay.

$350,000 * .28 = $98,000

Subtract the amount of taxes from your income.

$350,000 - $98,000= $252,000

2. Annual salary: $10,000

Federal income tax rate: 5%

Disposable income: $9,500

Find the amount of taxes that you’ll pay.

$10,000 * .05 = $500

Subtract the amount of taxes from your income.

$10,000 - $500= $9,500

3. Annual salary: $80,500

Federal income tax rate: 10%

Disposable income: $72,450

Find the amount of taxes that you’ll pay.

$80,500 * .10 = $8,050

Subtract the amount of taxes from your income.

$80,500 - $8,050= $72,450

4. Annual salary: $175,000

Federal income tax rate: 23%

Disposable income: $134,750

Find the amount of taxes that you’ll pay.

$175,000 * .23 = $40,250

Subtract the amount of taxes from your income.

$175,000 - $40,250= $134,750

5. Annual salary: $50,400

Federal income tax rate: 10%

Disposable income: $45,360

Find the amount of taxes that you’ll pay.

$50,400 * .10 = $5,040

Subtract the amount of taxes from your income.

$50,400 - $5,040 = $45,360

6. Annual salary: $93,550

Federal income tax rate: 18%

Disposable income: $76,711

Find the amount of taxes that you’ll pay.

$93,550 * .18 = $16,839

Subtract the amount of taxes from your income.

$93,550 - $16,839 = $76,711

7. Annual salary: $27,950

Federal income tax rate: 5%

Disposable income: $26,552.50

Find the amount of taxes that you’ll pay.

$27,950 * .05 = $1,397.50

Subtract the amount of taxes from your income.

$27,950 - $1,397.50 = $26,552.50