SENIOR ECONOMICS BUDGET
ACTIVITY 1: JOB
1.
Select a job you are interested in pursuing. Write a job description below:
2.
How much education do you expect to have before you get your first full
time job?
3.
For what company would you like to work? Why?
4.
What is the beginning yearly salary for that job?
5. Calculate the
following: What percentage of your income will you pay in Federal Taxes?
FEDERAL TAXES The United States federal
government taxes personal income using graduated scale. Income tax rates begin
at 10% and gradually increase to 15%, then 25%, then 28%, then 33%, then 35%,
and finally reaching a top rate of 39.6%. Each tax rate applies to a specific
range of income. This range is called a tax bracket. Where each tax bracket
begins and ends varies depending on a person's filing status.
Tax rates can also vary depending on the type of income a person has. Ordinary
tax rates apply to most types of income. There's a special tax rate schedule
that applies to long-term capital gains and qualified dividends.
Let's first get an overview of all the tax rates for 2014. The chart below
shows the ordinary tax rates (first column) and rate for long-term gains and
qualified dividends (second column). The rest of the columns show the beginning
and end of each tax bracket, grouped by filing status.
It's important to note that the dollar amounts represent taxable income
-- which is total worldwide income after various deductions have been
subtracted.
|
Tax Rates |
Single |
Head of Household |
Married Filing Separately |
Married Filing Jointly / Qualifying
Widow or Widower |
|||||
|
Ordinary Income |
Long Term Capital Gains and Qualified Dividends |
Taxable Income over |
to |
Taxable Income over |
to |
Taxable Income over |
to |
Taxable Income over |
to |
|
10% |
0% |
$0 |
$9,075 |
$0 |
$12,950 |
$0 |
$9,075 |
$0 |
$18,150 |
|
15% |
0% |
9,075 |
36,900 |
12,950 |
49,400 |
9,075 |
36,900 |
18,150 |
73,800 |
|
25% |
15% |
36,900 |
89,350 |
49,400 |
127,550 |
36,900 |
74,425 |
73,800 |
148,850 |
|
28% |
15% |
89,350 |
186,350 |
127,550 |
206,600 |
74,425 |
113,425 |
148,850 |
226,850 |
|
33% |
15% |
186,350 |
405,100 |
206,600 |
405,100 |
113,425 |
202,550 |
226,850 |
405,100 |
|
35% |
15% |
405,100 |
406,750 |
405,100 |
432,200 |
202,550 |
228,800 |
405,100 |
457,600 |
|
39.6% |
20% |
406,750 |
-- |
432,200 |
-- |
228,800 |
-- |
457,600 |
-- |
|
Ordinary Tax Rates for Single Filing
Status [Tax Rate Schedule X, Internal
Revenue Code section 1(c)] |
||||||
|
If taxable Income is: |
a |
b |
c |
d |
e |
|
|
Over |
But not over |
Taxable income |
Multiplication amount |
Multiply (a) by (b) |
Subtraction amount |
Subtract (d) from (c). This is the federal income tax. |
|
$0 |
$9,075 |
|
× 0.10 |
|
$0 |
|
|
9,075 |
36,900 |
|
× 0.15 |
|
453.75 |
|
|
36,900 |
89,350 |
|
× 0.25 |
|
4,143.75 |
|
|
89,350 |
186,350 |
|
× 0.28 |
|
6,824.25 |
|
|
186,350 |
405,100 |
|
× 0.33 |
|
16,141.75 |
|
|
405,100 |
406,750 |
|
× 0.35 |
|
24,243.75 |
|
|
406,750 |
-- |
|
× 0.396 |
|
42,954.25 |
|
6. How much is your yearly salary after you subtract your Federal
Tax?
Calculate the following:
STATE TAXES
Illinois
Personal Income Tax rate is increased from 3% to 5% between January 1,
2011 and December 31, 2014.
7. What
is your yearly income after you take out your state taxes?
FICA
Federal Insurance Contributions Act (FICA) tax /ˈfaɪkə/ is
a United States federal payroll (or employment) tax[1] imposed on both employees and employers to fund Social Security
and Medicare[2] —federal
programs that provide benefits for retirees, the disabled, and children of
deceased workers. The tax also provides funds to the health care system for
institutions that provide healthcare for workers that do not have health
insurance and can not afford healthcare treatment.
Social Security benefits include old-age, survivors,
and disability insurance (OASDI); Medicare provides hospital insurance benefits
for the elderly. The amount that one pays in payroll taxes throughout one's
working career is associated indirectly with the social security benefits
annuity that one receives as a retiree.[3] This has caused some to claim that the payroll tax is not a tax
because its collection is tied to a benefit.[4]
For
2014, the employee's share of the Social Security portion of the FICA tax is 6.2% of gross compensation up to a
limit of $117,000 of gross compensation (resulting in a maximum Social Security
tax of $7,254).
8. What
is your salary after you take out your FICA tax?