2.2.2.G1 The Basics of Taxes Personal Finance Mrs. Bullock.

2.2.2.G1

The Basics of TaxesPersonal Finance

Mrs. Bullock

2.2.2.G1

© Take Charge Today – August 2013 – The Basics of Taxes – Slide 2Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

What are taxes?

Taxes – A ________ of money demanded by a government to support the government itself as well as specific facilities or ____________

Paid by taxpayers – A person who ______ a tax to national, state, county or municipal (city/town) _________________________

2.2.2.G1


Community

United States

_______ County City/ town

2.2.2.G1


What are benefits of being a part of these communities?

__________ Libraries

Military for

________ security

___________________

Police and fire

departments

___________ (parks, trails)

?

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“You are better off being in a community than by yourself”

As a __________ member you receive many benefits you

could not pay for individually

___________ are a way members of a community provide for one another

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How do taxpayers pay taxes?

________Tax

Payroll Tax

________Tax

Sales Tax

________ Tax

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Income tax

Income tax - tax on ________ and unearned income

Earned income -money earned from working for ______

Unearned income - income received from

sources ________ than employment

Example: _______ and salaries earned from employment

Example: ________ earned from a

savings account

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Components of income tax

Federal income

tax

State income

tax

____________ tax

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Federal Income Tax

• Earned and unearned income

• __________ income = _________ tax paid

• __________ of people living in the U.S.

• Operations of __________ government

• Government programs• _________• defense of

the nation• disaster

relief

2.2.2.G1


State Income Tax

• Earned and __________ income

• Higher income = _________ tax paid

• Those living in states with a ___________ income tax

• _______ all states have a state income tax

• __________ by state

• Examples:• State

__________• Operations

of state government

2.2.2.G1


Payroll TaxPayroll tax – A tax on earned income that supports

the Social Security and Medicare programs (also known as FICA)

• A set percentage of earned income

• Deducted out of paycheck (except for self-employed)

• Individuals who earn income from working for pay

• Employers

• Social Security program

• Medicare program

2.2.2.G1


What is Social Security?

• ______________ for:• _________________ • People with

profound ________________

• Children who have lost a parent

• A person with children who has experienced the death of a spouse

• ________% of earned income (decreased to 4.2% for 2011-12)

• Up to an annual _________________

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What is Medicare?

• Helps pay for ___________ care for ___________ citizens

• 1.45% of earned income

• No ___________

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Employers also pay Social Security and Medicare

Match their employees tax contributions

Self-employed people pay both the employee and employer contributions

Employee contribution:

$100

Employer contribution:

$100

Employer pays $200 in

payroll taxes to the

federal government

2.2.2.G1


What is the difference between income tax and payroll tax?

Income Tax Payroll TaxPaid on _______ earned and unearned income

Paid on _________ earned income

Amount ______ depends on many different factors but increases as income increases

A set ____________ of earned income is paid

_________ many different operations and programs of the federal government

Funds the Social Security and Medicare _________________

2.2.2.G1


Property Tax

Property tax - a tax on property, such as land, buildings (including homes), and motor vehicles

• __________ of property value

• Amount paid _________ depending upon where you live

• ___________ ownerso _______ to

license car is a property tax

• __________• Expenses of

state and local ___________

2.2.2.G1


Sales Tax

Sales tax – tax on purchased goods and services

• A ___________ added to the original price of an item

• $1.00 item charged 6% sales tax = $1.06

• Anyone who __________ an item charged with sales tax

• Some states ________ have sales tax

• __________ of state and local governments

2.2.2.G1


Excise Tax

Excise taxes – taxes collected from the seller or retailer and as such often remain ____________ in the price of a produce or service

• Purchase of ________ items:• Gas• Hotel rooms• Airline tickets• Cigarettes• Alcohol

• Often included within the _____ of these items

• Anyone who purchases ___________ items

• Varies by location

• Expenses of state and local governments

2.2.2.G1


How are tax rates determined?

Determined by ______ representatives (city councils, county commissions, state legislatures, Congress)

Elected by _____________

Taxpayers = voters

Work as a voting group to elect representatives who will represent the majority

2.2.2.G1


Summary

Without taxes it would be hard to ______ for

many of the benefits of being a member of a

community

Taxes are charged in many _____________

forms

The ___________ of taxes you pay and what you pay those taxes on

will vary depending upon where you live

and your income

Understanding _________ is an

important part of money management

2.2.2.G1 The Basics of Taxes Personal Finance Mrs. Bullock.

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