Future Business Leaders of America (FBLA) Agribusiness Practice Test

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What does take-home pay exclude?

Taxes and deductions
Gross earnings
Bonuses and incentives
Retirement contributions

The correct answer is: Taxes and deductions

Take-home pay refers to the amount of money an individual receives after all applicable taxes and deductions have been subtracted from their gross earnings. It is the net income available for personal use. Therefore, take-home pay excludes taxes and various deductions, as these are amounts deducted from the gross pay in order to arrive at the final amount that is available to the employee. Gross earnings represent the total income an employee makes before any deductions, which makes it fundamentally different from take-home pay. Similarly, bonuses and incentives are typically included in gross earnings before deductions, so they are not excluded from take-home pay. Retirement contributions may affect the amount of take-home pay, but they are part of the deductions that reduce gross earnings to arrive at the final take-home figure. Thus, understanding that take-home pay is calculated by subtracting taxes and other deductions from gross income clarifies why those elements are excluded from take-home pay.