CALM - Moving Out 2¶

Part 2 - Income¶

📗Now let’s take a look at your potential income. First, some definitions:

Paycheque Definitions¶

Gross Income (pay/earnings)¶

The amount of income/earnings, for any pay period, before deductions

Net income (pay/earnings)¶

The amount of income/earnings, for any pay period, after deductions (Take home pay)

CPP - Canada Pension Plan¶

2.3% of gross income deducted for insurance in case of unemployment

Income Tax¶

A deduction paid to the Federal and Provincial government for taxes

LTD¶

A deduction for Long Term Disability insurance

Union Dues¶

Fees paid for membership in a union

Bonds¶

An investment in which a business or government pays a set interest rate

Advance Earnings¶

Deducted money that was received in advance of the pay cheque

Overtime Earnings¶

Pay received for working over 8 hours a day or 44 hours a week, whichever is greater

Calculating Net Income¶

📗Click on the code cell below, then click the Run button on the toolbar to calculate your net income. You may also change some values in the code to see how the results change.

#✏️
wagePerHour = 15  # this is your wage in $/hour
hoursPerDay = 8
workdaysPerMonth = 21

grossIncome = wagePerHour * hoursPerDay * workdaysPerMonth
print('Your gross income is $', grossIncome, 'per month.')

incomeTax = .15 + .10   # assume federal income tax is 15% and provincial is 10%
cpp = .0495             # assume Canada Pension Plan is 4.95%
ei = .0188              # assume Employment Insurance is 1.88%
unionDues = .0075       # 0.75% sounds reasonable for union dues

deductions = grossIncome * (incomeTax + cpp + ei + unionDues)
print('$', '{:.2f}'.format(deductions), ' will be taken off your paycheck.')

netIncome = grossIncome - deductions
print('Your net income is $', '{:.2f}'.format(netIncome), 'per month.')
%store netIncome        # store that value in memory for later notebooks

Graphing Income¶

📗 We can also look at how your net income (take-home pay) changes based on your hourly wage. We will use 2019 taxation rates as well as EI and CPP rates. Run the cell below (without editing it) to generate a graph.

#📗
def calculateFederalTax(income):
    taxBrackets = [47630, 95259, 147667, 210371]
    taxRates = [.15, .205, .26, .29, .33]
    taxes = []
    for i in range(0, len(taxBrackets)):
        taxes.append(taxBrackets[i] * taxRates[i])
    if income < taxBrackets[0]:
        tax = income * taxRates[0]
    elif income < taxBrackets[1]:
        tax = taxes[0] + (income - taxBrackets[0]) * taxRates[1]
    elif income < taxBrackets[2]:
        tax = taxes[1] + (income - taxBrackets[1]) * taxRates[2]
    elif income < taxBrackets[3]:
        tax = taxes[2] + (income - taxBrackets[2]) * taxRates[3]
    else:
        tax = taxes[3] + (income - taxBrackets[3]) * taxRates[4]
    return tax

def calculateProvincialTax(income):
    taxBrackets = [131220, 157464, 209952, 314928] # for Alberta
    taxRates = [.1, .12, .13, .14, .15]
    taxes = []
    for i in range(0, len(taxBrackets)):
        taxes.append(taxBrackets[i] * taxRates[i])
    if income < taxBrackets[0]:
        tax = income * taxRates[0]
    elif income < taxBrackets[1]:
        tax = taxes[0] + (income - taxBrackets[0]) * taxRates[1]
    elif income < taxBrackets[2]:
        tax = taxes[1] + (income - taxBrackets[1]) * taxRates[2]
    elif income < taxBrackets[3]:
        tax = taxes[2] + (income - taxBrackets[2]) * taxRates[3]
    else:
        tax = taxes[3] + (income - taxBrackets[3]) * taxRates[4]
    return tax

def calculateEI(income):
    eiMaxInsurableEarnings = 53100
    eiRate = 0.0162
    if income >= eiMaxInsurableEarnings:
        eiPremium = eiMaxInsurableEarnings * eiRate
    else:
        eiPremium = income * eiRate
    return eiPremium

def calculateCPP(income):
    cppMaxContributoryEarnings = 53900
    cppRate = 0.051
    if income >= cppMaxContributoryEarnings:
        cppPremium = cppMaxContributoryEarnings * cppRate
    else:
        cppPremium = income * cppRate
    return cppPremium

wages = []
grossIncomes = []
netIncomes = []
for wage in range(15, 150):
    wages.append(wage)
    grossAnnualIncome = wage * 8 * 240
    grossIncomes.append(grossAnnualIncome)
    incomeTax = calculateFederalTax(grossAnnualIncome) + calculateProvincialTax(grossAnnualIncome)
    eiPremium = calculateEI(grossAnnualIncome)
    cppPremium = calculateCPP(grossAnnualIncome)
    netIncome = grossAnnualIncome - (incomeTax + eiPremium + cppPremium)
    netIncomes.append(netIncome)

import plotly.graph_objects as go
fig = go.Figure()
fig.add_trace(go.Scatter(x=wages, y=grossIncomes, name='Gross Income'))
fig.add_trace(go.Scatter(x=wages, y=netIncomes, name='Net Income'))
fig.update_layout(
    title=go.layout.Title(text='Net Income vs Hourly Wage'),
    xaxis=go.layout.XAxis(title=go.layout.xaxis.Title(text='Hourly Wage')),
    yaxis=go.layout.YAxis(title=go.layout.yaxis.Title(text='Income')))
fig.show()

📗The graph shows that the difference between gross income and net income (after deductions) increases as wage increases. For more information about this, you may want to read about progressive taxation.

You have now completed this section. Proceed to section 3

Callysto Curriculum Notebooks