Economics – Dr.

Sauer

Taxes Individuals Pay 1. Federal Taxes __________________ Tax __________________ Tax The Social Security tax is also called the FICA (Federal Insurance Contributions Act) tax. (6.2%) The ____________________ Tax is used to provide medical benefits for certain individuals when they reach age 65. (1.45%) _______________ Tax _______________ Tax ________________Tax (18.4cents per gallon)

Calculating your Federal Income Tax 1. compute ____________ income - wages, salaries - interest, dividends, rental income

2. compute _______________ gross income subtract off: - retirement savings contributions - educator expenses - job-related moves expenses - if self-employed: - health insurance premiums - 50% of paid payroll taxes

- alimony - contributions to HSAs - interest paid on student loans

3. Subtract any ______________________________ - fixed amount of money that is deducted for the taxpayer, spouse, dependents - indexed for inflation 2011: $3,700 per person - if you are someone’s dependent, then you cannot claim your own personal exemption - can’t claim as a dependent anyone who files a joint tax return with a spouse - spouses filing a joint return can claim two personal exemptions Exemptions used to be “phased out” for very high income levels. - personal exemption phaseout (PEP) These limits will not apply for the year 2010, 2011 or 2012. The limits will come back in 2013 (unless further legislation is passed).

Filing Status Married Filing Jointly Qualifying Widow(er) Head of Household Single Married Filing Separately

Income Range for PEP (2009) Phaseout Begins Phaseout Ends 250,200 372,700 250,200 372,700 208,500 331,000 166,800 289,300 125,100 186,350

4. Decide on deduction _________________ ___________________ Deduction: $11,600 for married couples filing jointly $5,800 for singles $5,800 for married individuals filing separately $8,500 for heads of household additional standard deduction for blind people and senior citizens $1,150 for married individuals $1,450 for singles and heads of household ___________________ Deduction: - medical and dental expenses exceeding 7.5% of AGI - other taxes paid (state, local income tax) - interest on mortgage - charitable donations - casualty and theft losses - union dues and job travel expenses

According to the IRS, 2 out of 3 tax payers takes the standard deduction . (IR-2010-127, Dec. 23, 2010)

5. Compute Federal Income Tax ____________________ Here are the tax brackets for a single person for 2011: Marginal Tax Tax Bracket Rate over but not over 10% $0 $8,500 15% $8,500 $34,500 25% $34,500 $83,600 28% $83,600 $174,400 33% $174,400 $379,150 35% $379,150 Suppose you are single in 2011 and your AGI is $50,000. On the first $8500, you pay 10% in taxes.

On the next portion of income, you pay 15% in taxes.

On the next portion of income, you pay 25% in taxes.

The total amount you pay in taxes is:

The marginal tax rate is the tax rate paid on an ____________________ dollar of income. If your AGI is $50,000 and then you earn one extra dollar of income, that dollar is taxed at a rate of _______%. Your current marginal tax rate is ______%.

The average tax rate is the total taxes paid, ________________ by total income. Suppose your gross income is $60,000.

2. Colorado State Taxes for Individuals ________________ Tax (4.63%) ________________ Tax (2.9%) Consumer _____________ Tax (purchases that did not include Colorado sales tax … internet, mail order, phone) (2.9%) ________________________ Income Tax (4.63%) ___________________ Tax (22cents per gallon) ___________________ Tax (4.2cents per cigarette, 2.9% per pack, 40% on other tobacco products) ___________________ Tax (8cents per gallon beer/cider, 7.33cents per liter wine, 60.26cents per liter of spirits) 3. ___________________Taxes and Fees Motor Vehicle Registration Property Tax City Sales Tax 4. ___________________ Taxes RTD levies a sales/use tax of 1.0% . The Football District has a 0.1% sales/use tax. The Scientific and Cultural Facilities District has a 0.1% sales/use tax.

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