Federal Income Taxes & Deductions
Please read the below example from your MoneySKILL lesson.
Joey is the first of the three friends who intends to work full time. He knows that he can get a construction job that pays $10 per hour. If he works eight hours a day for five days a week, his gross pay will be $400 per week, which he figures will cover his costs for housing, transportation and spending money. However, Joey didn't calculate the deductions he would have to pay. Look at the chart to the left to see what his pay record looks like. In fact, the total payroll deductions of $130.60 are equal to 32.65 percent of his gross pay (pay before deductions), leaving him just $269.40 in take-home pay to spend each week. Joey may have to rethink his plans.
Joey's net income is less than his gross pay. Gross pay or gross income is your income before any deductions are taken out. Net income is what's left after payroll deductions are subtracted. so net income is always less than gross pay if any deductions are taken out, as they are in this and most cases.
Joey is the first of the three friends who intends to work full time. He knows that he can get a construction job that pays $10 per hour. If he works eight hours a day for five days a week, his gross pay will be $400 per week, which he figures will cover his costs for housing, transportation and spending money. However, Joey didn't calculate the deductions he would have to pay. Look at the chart to the left to see what his pay record looks like. In fact, the total payroll deductions of $130.60 are equal to 32.65 percent of his gross pay (pay before deductions), leaving him just $269.40 in take-home pay to spend each week. Joey may have to rethink his plans.
Joey's net income is less than his gross pay. Gross pay or gross income is your income before any deductions are taken out. Net income is what's left after payroll deductions are subtracted. so net income is always less than gross pay if any deductions are taken out, as they are in this and most cases.
Federal income tax must be paid on the income we earn each year. The federal government uses income tax money to run the country and provide services to its citizens. Income taxes in the United States are progressive which means that as a worker's income increases, he or she pays a higher percentage of income in taxes. In the United States, income tax rates start at 10 percent for those with the lowest incomes and go up to 39.6 percent for those with the highest income. Progressive income taxes are designed to give a break for those low-income workers who can least afford to pay taxes. As we make more income, our marginal tax rate goes up. This is the rate that we pay on additional income. For example, the table to the right shows us that a single person, like Joey, must pay 10% on the first $8,925 in taxable income that he earns. If he earns more than $8,925 in taxable income, he must pay 15% on the amount over $8,925 but below $36,250. The marginal tax rates has gone from 10% to 15% and keeps going up as taxable income increases.
Directions
The purpose of this assignment is to give you an understanding of how gross pay differs from net pay and how earning more money effects the amount you will be taxed. After very carefully reading the material above, please respond with your thoughts on our federal income tax bracket. Do you think it is fair that those who earn more money pay more in taxes? Or, do you think it feels like those who earn more are being penalized? Why do people who make less pay a lower tax rate? What services are provided by the government with the tax money taken out of our checks? Should the federal income tax bracket look different? If so, how?
Please respond to the above questions if you wish, or please share your thoughts in general about federal income taxes. If you choose to research on the Internet, please provide a source. Responses should be detailed, grammatically correct, and a minimum of 150 words. Anything less will not be graded. Type your response in Microsoft Word and copy & paste to the response box below. You don't have to answer specific questions, but instead describe your thoughts in general about credit.
Please respond to the above questions if you wish, or please share your thoughts in general about federal income taxes. If you choose to research on the Internet, please provide a source. Responses should be detailed, grammatically correct, and a minimum of 150 words. Anything less will not be graded. Type your response in Microsoft Word and copy & paste to the response box below. You don't have to answer specific questions, but instead describe your thoughts in general about credit.