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Income Taxes
Generally includes both State and Federal Taxes
Progressive Tax – an income system in which the tax rates increase as the amount subject to taxation increases.
Both Arizona and Federal Income taxes are progressive.
The tax rates on the next few slides represent Marginal Tax Rates:
Federal Income Tax Rates
Taxable Income Tax Rate
$0 – $9,075 10%
$9,075 – $36,900 15%
$36,900 – $89,350
25%
$89,350 – $186,350
28%
$186,350 – $405,100
33%
$405,100 – 406,750
35%
$406,750 and above
39.6%
Single Tax Brackets 2014
Taxable IncomeTax Rate
$0 – $8,700 10%
$8,700 – $35,350 15%
$35,350 – $85,650
25%
$85,650 – $178,650
28%
$178,650 – $388,350
33%
$388,350 and above
35%
Single Tax Brackets 2012
Federal Taxes Example
Example: You are filing single for 2012 and you make $80,000 per year. Find the amount of federal taxes.
(8700 – 0)(0.10) = 870(35350 – 8700)(.15) = 3997.50(80,000 – 35,350)(.25) = 11162.50
Total Federal Taxes : $16,030
Effective Tax Rate: 16,030/80,000 = .2004 = 20.0%
You try…
Example: You are filing single for 2014 and you make $80,000 per year. Find the amount of federal taxes and effective tax rate.
(9,075 – 0)(.10) = 907.50(36,900 – 9075)(.15) = 4,173.75(80,000 – 36,900)(.25) = 10,775
Total FIT: $15,856.25
Effective tax rate: $15,856.25 / 80,000 = .1982 = 19.8%
Federal Income Tax Rates
Go to http://www.moneychimp.com/features/tax_brackets.htm to look at others (married filing jointly, married filing separately, head of household)
Note: Our examples are without ANY tax credits or deductions. Almost no one pays this full amount.
Arizona Income Tax Rates
Tax Bracket (Single) Marginal Tax Rate
$0+ 2.59%
$10,000+ 2.88%
$25,000+ 3.36%
$50,000+ 4.24%
$150,000+ 4.54%
State Taxes Example
Example: You are filing single for 2012 your gross income is $80,000. Find the amount of state taxes taken out.
(10,000 – 0)(.0259) = $259(25,000 – 10,000)(.0288) = $432(50,000 – 25,000)(.0336) = $840(80,000 – 50,000)(.0424) = $1,272
Total State Taxes: $2,803
Effective Tax Rate: 2803/80000 = 3.5%
Payroll Taxes
In the US, the most common payroll taxes are for Social Security and Medicare:
Social Security Tax Rate: 6.2%Medicare Tax Rate: 1.45%
Total Taxes Example
Example: Total tax in 2012 on $80,000 gross income.
Federal Income Tax: Arizona Income Tax: Social Security: Medicare:
Total Tax:
Other Deductions from your Paycheck
Health Insurance- In general, you and your employer will share the cost of your health insurance.
Retirement Accounts- 401k and 403b: Ex.) You elect to place $150 of your income into a 401k and you will be able to use the money that you invested later in life.
- Pensions: Similar to a 401k but is not owned by you, but rather a membership into a retirement program.
- (A pension is a contract for a fixed sum to be paid regularly to a person, typically following retirement from service)
Homework # 1
Take your assigned professionCalculate the Gross Income using Salary.comCalculate the Monthly Gross IncomeCalculate the Marginal Federal and State Taxes
NOTE: Again, no one pays this much. Taxes are much more complicated then we are doing.
Go to Cigna, Blue Cross Blue Shield, United Healthcare, or Humana One and find a health insurance plan. We will assume that your employer will cover 80% of the cost. Pick a good plan.
Calculate your payroll deductions. If you are a wise person you are putting AT LEAST 10% of your gross pay into a retirement account.
Calculate your Monthly Net payCreate a paycheck stub for your profession