0

What is it? Why is it

important?

• INCOME – earnings received for labor

and/or services
– Basis for budgeting for necessities &
desires
– Impacts your ability to plan for now & later

2
TAXES: Required payments to
a government (from your
income, spending, or
ownership)

INCOME TAX: A portion of one’s

personal income paid to a
government.

3
 National debt

Government National defense

administration

Income
Tax

Veterans affairs Social programs

Law enforcement

4
 Human services,
health care

Parks and State and/or local

recreation government
Property
Tax
Colleges, Police, jails,
schools, libraries courts

Transportation

5
 Human services,
health care

Local parks and State and/or local

recreation government

Sales
Tax
State and/or local
Colleges, police, jails,
schools, libraries courts

Transportation

6
• As of September 2015, the states that
do not have a state sales tax are:
Alaska, Delaware, Montana, New
Hampshire and Oregon.
• Only 9 states do not have income tax:
Alaska, Florida, Nevada, Tennessee,
Texas, Washington, Wyoming, South
Dakota, New Hampshire
7
SOCIAL SECURITY:
A social insurance system that
provides benefits to most
Americans who are retired, sick,
or too disabled to work, and to
families of workers who have died.

MEDICARE: A social insurance

program that extends health coverage to
almost all Americans age 65 and over.

8
9
GROSS ANNUAL INCOME (GAI): Total pay or
earnings made over a one-year period before any deductions
have been taken.
GROSS MONTHLY INCOME (GMI): Total amount of
earnings made over a month before any deductions (1/12 of GAI).
NET ANNUAL INCOME (NAI): Income amount
remaining after a year’s worth of deductions have been taken.
NET MONTHLY INCOME (NMI): Amount of monthly
income remaining after all deductions have been taken
(sometimes referred to as take-home pay).

10
GAI divided by 12 = GMI
GMI minus all monthly
deductions = NMI

11
 Example: single person claiming 0 allowances

GAI $56,000
GMI $56,000 divided by 12 = $4,666.67
Deductions subtracted from GMI:
Monthly Federal Income Tax $ 774.00
Monthly Social Security (FICA) $ 289.33
Monthly Medicare $ 67.67
Total Monthly Deductions $1,131.00
-$1,131.00

NMI (GMI - Total Monthly Deductions) $3,535.67

12
FINISH page 15 for HW
– we will review
tomorrow

13
 Paycheck Calculations
(Page 15)

Jamal works at the recreation center 15 hours a week during the

school year. He earns $8.75 an hour. In a typical month, he works 63
hours. What is his NMI?

• What is Jamal’s GMI? =

– Monthly Federal Income Tax (10%) =

– Monthly Social Security (6.2%) =
– Monthly Medicare (1.45%) =
– Monthly Sales Tax (4%) =
– Monthly Local Tax (0.1%) =

• What are the Total Monthly Deductions? =

• What is Jamal’s NMI? =

14
Jamal

15
 Paycheck Calculations
(Page 15)

A college student, Trey works part time for an annual salary of

$13,500 a year. What is his NMI?

• What is Trey’s GMI? =

– Monthly Federal Income Tax (11.6%) =

– Monthly Social Security (6.2%) =
– Monthly Medicare (1.45%) =
– Monthly Sales Tax (4%) =
– Monthly Local Tax (0.1%) =

• What are the Total Monthly Deductions? =

• What is Trey’s NMI? =

16
Trey

17
Marie

19
REMEMBER:
GAI divided by 12 = GMI
GMI minus all monthly
deductions = NMI

20
 Unit 1 vocabulary of
significance

• Interests, abilities, • GMI

values, aptitude = good to
know re: motivational spending • GAI
& investing
• NMI
• Income • NAI
• Sales tax • Deductions
• Property tax • How to determine
• Income tax your NMI
• Social security
• Medicare
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