Unit 3 Test Review Consumer Math

Payroll deductions are amounts withheld from an employee's gross pay, which can be mandatory (like taxes) or voluntary (like retirement savings).

Gross pay is the total earnings before any deductions, while net pay is the amount received after all deductions are taken out.

FICA stands for the Federal Insurance Contributions Act, which mandates payroll taxes for Social Security and Medicare.

A budget surplus occurs when income exceeds expenses.

A budget deficit occurs when expenses exceed income.

Mandatory deductions are required by law, such as federal income tax and FICA.

Voluntary deductions are not required by law and can include contributions to retirement plans or health insurance.

Discretionary income is calculated by subtracting fixed expenses from net pay.

Net pay = Gross pay - Total deductions.

Understanding payroll deductions helps individuals manage their finances and plan for taxes and savings.