Question

You are debating about whether to buy a new computer for $800.00 or a refurbished computer with the same equipment for $640.00. If you are paid $10.00/hour and your deductions are FICA (7.65%), federal tax withholding (12%), and state tax withholding (8%), how many hours do you have to work to pay for the new computer?

Answer 1

Doesn't say which computer to calculate for. I'll do the $800 one first.

to afford the $800 computer, the income after taxes must be 800. let's say x = pre-tax income.

at 7.65% FICA tax and 12% federal tax, (x - 0.0765x - 0.12x) = 800. notice took the pre-tax income, subtracted both tax deductions, and set the total equal to 800. solve for x.

since the hourly income is $10/hr, divide x/10 to get the # of hours.

if you want to buy the $640 computer, repeat the previous calculations but with 640 instead of 800.