# Calculate Gross Tax only knowing Net Earnings

In summary, the conversation discusses the possibility of creating a formula to calculate the gross earnings required to earn a certain net value, based on a given tax schedule. The formula would be a step function, with different calculations for different ranges of net income. A more realistic tax schedule is also mentioned, and an example formula in Microsoft Excel is provided.
Hi All,

I was wondering if it is possible to work out a formula for calculating what your gross earnings would have to be to earn a certain net value.

The tax on earnings scales go like this:

Between $0 -$6000 you pay no tax.
Between $6001 -$25000 you pay 15c per dollar.
Between $25001 -$75000 you pay 30c per dollar.
Between $75001 -$150000 you pay 40c per dollar.
Greater than $150000 you pay 45c per dollar. So Gross - Tax = Net. Based on the above I'd like to be able to solve what your gross would be if you knew your net earnings. Does anyone know how to write the formula for this? I'm having trouble just writing a formula to explain the above solving for gross. Brad. Just as your tax table is a "step function", so the formula giving gross income as a function of net income will be a step function: Let N= net income, G= gross income in dollars. If 0<= N<= 6000, then G= N If 6001<= N<= 29412, Then N= G- .15G= 0.85G so G= N/.85. (the upper limit,$29412, is 25000/.85)
If 29412<= N<= 107143, Then N= G- .30G= 0.70G so G= N/.70.
(Again, the upper limit, $107143, is 75000/.70) etc. By the way, a more realistic tax schedule would be Between$0- $6000 you pay no tax. Between$6001- $25000 you pay 15c per dollar over$6000
Between $25001-$75000 you pay 3750 (.15*$25000) plus 30c per dollar 1over$25000
Between $75001-$150000 you pay $18750 (3750+ .30(50000)) plus 40c per dollar over$75000
Over $150001, you pay$48750 ($18750+ .40(75000)) plus 45c per dollar over$150001.

If you'd like a formula in Microsoft Excel to this for you...

=IF(A1<=6000,0,IF(A1<=25000,(A1-6000)*0.15,IF(A1<=75000,3750+(A1-25000)*0.3,IF(A1<=150000,18750+(A1-75000)*0.4,48750+(A1-150000)*0.45))))

where A1 is the cell which contains the Net salarý.

## 1. How do you calculate gross tax when only given net earnings?

The formula for calculating gross tax when only given net earnings is to divide the net earnings by 1 minus the tax rate. For example, if the tax rate is 20%, the formula would be: Gross Tax = Net Earnings / (1 - 0.20).

## 2. What is the difference between gross tax and net earnings?

Gross tax refers to the total amount of taxes owed before any deductions or adjustments are made, while net earnings are the amount of income remaining after taxes and other deductions have been taken out.

## 3. How do deductions and adjustments affect the calculation of gross tax?

Deductions and adjustments can lower the amount of gross tax owed by reducing the taxable income. This means that the net earnings would be higher, resulting in a lower gross tax amount.

## 4. Are there any other factors that can impact the calculation of gross tax?

Yes, there are various factors that can affect the calculation of gross tax, such as tax credits, exemptions, and filing status. These factors can lower the taxable income and ultimately reduce the amount of gross tax owed.

## 5. Is gross tax the final amount owed to the government?

No, gross tax is not the final amount owed to the government. After calculating gross tax, deductions, and adjustments, the final amount owed is determined. This amount can be different from the initial gross tax calculation.

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