GROSS SALARY

Gross salary means your salary before any deductions. In this project, you will calculate deductions for retirement contributions, FICA taxes, federal income taxes, state income taxes, and health insurance. Your pay after deductions is called your net pay. This is what you take home. For gross salary estimates you can use any of the following: salary.com, payscale.com, US Dept. of Labor (BLS.gov), monster.com, simplyhired.com, glassdoor.com, etc. Just a reminder to be realistic. The purpose of this budget is to give you a realistic view of what your finances will look like immediately following graduation. Complete the chart below based on your research. Enter N/A for any cell that is not applicable to your project. Enter the monthly amounts where appropriate on your budget.

	Initial	Amended
Gross Annual Salary
Gross Monthly Salary
Company Name and Location
Position/Job Title
Source of Information

RETIREMENT CONTRIBUTIONS

The earlier you start saving, the better. If the company you work for offers a retirement plan, such as a 401(k), the employer will typically match the contributions you make to your retirement plan up to a certain percentage or dollar amount. Annual individual contributions to a 401(k) are limited to $19,500 in 2021.

If you do not work for a company who offers a retirement plan, then you should consider setting up an IRA account. Contributions to Traditional IRA accounts are deductible for tax purposes; contributions to Roth IRA accounts are not deductible for tax purposes. Annual individual contributions to IRA accounts are limited to $6,000 in 2021.

Whatever your choice, for purposes of this project just choose a percentage of your income (say 5%) to contribute to your retirement plan and complete the boxes below. The amount you contribute to your retirement plan is subtracted from your gross salary in calculating your net pay and reduces your taxable income for purposes of federal and state income tax calculations.

Complete the following chart. Enter N/A for any cell that is not applicable to your project. Enter the monthly amounts where appropriate on your budget.

	Calculation	Initial Amount	Amended Amount
Annual Retirement Contributions
Monthly Retirement Contributions

TAXES

Tax rules are complicated. The goal of the following calculations is to give you an estimate of your taxes. You will only need to amend your tax calculations if you change either your income or your retirement contributions for your amended budget. The amounts you calculate below, like your retirement contributions, are subtracted from your gross salary in calculating your net pay.

FICA Tax Calculation

The FICA, Federal Insurance Contribution Act, tax consists of Social Security tax and Medicare tax. Both the employer and the employee are responsible for paying FICA taxes. However, only the employee portion is subtracted from gross pay. The employer portion is considered a payroll tax expense. FICA taxes are remitted to the Social Security Administration by the employer.

For 2021, the Social Security tax of 6.2% is paid on the first $142,800 of salaries and wages by both the employer and employee. The Medicare tax of 1.45% is paid on all salaries and wages by both the employer and employee. In total, 7.65% in FICA taxes are deducted from your gross pay for the first $142,800 of your salary and wages. Above that salary and wage limit, 1.45% in FICA taxes are deducted from your gross pay. Retirement plan contributions are not deducted from gross salary when calculating FICA taxes. For example, if your annual gross wages are $65,000 and your retirement plan contributions are $3,000, your FICA tax would be calculated as follows: $65,000 x 7.65% = $4,973. (rounded up to the nearest dollar). This amount would be deducted from your gross pay. The employer would match this same amount and expense it as a payroll tax expense.

Complete the following chart. You will need to amend your FICA tax calculation if you change your gross salary for your amended budget. Enter N/A for any cell that is not applicable to your project. Enter the monthly amounts where appropriate on your budget.

	Tax Calculation (in the same format as shown in the example above)	Initial Amount	Amended Amount
Annual FICA Tax
Monthly FICA Tax