HDF 322 Lecture 8 Outline of Last Lecture I Housing Alternatives Outline of Current Lecture II Taxes and Financial Planning III Different types of Taxes IV Tax Freedom Day V 8 Hour Workday VI Purpose of Federal Taxes VII Tax Evasion and Tax Avoidance VIII FICA Taxes IX Tax Rates X Marriage Penalty Current Lecture I Taxes and Financial Planning 1 3 of your income goes to ALL taxes so you need to be concernedso pay what you owe and no more a These are only federal income taxes no state taxes in TX b Understanding rules and regs are important in financial decision II Different types of Taxes don t need to know specific types just that we have tax for everything III Tax Freedom Day These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute IV the average person will have paid all their taxes on that day and then they start working for themselves Jan Feb March and half of April over 3 months that s why they say 1 3 of income goes to pay taxes V 8 Hour Workday a think of it as a workday federal income taxes take about 1 hour and then housing then medical see slide you can see where people are spending their money VI Purpose of Federal Taxes a all of these slides to show you some significance of TAXES and personal finance not just a little penny it s a sig lump of money that people pay every year so having knowledge about this is very important bc that knowledge allows you to make decisions more or less tax no wonder its crazy and cant be comprehended bc we try to do so much with federal tax income system VII Tax Evasion and Tax Avoidance TAX EVASION deliberate nonpayment of taxes legally owed not legal a TAX AVOIDANCE strategic use of knowledge of tax rules to avoid overpayment of taxes this is ok VIII FICA Taxes a 2 components social security and medicare this is proper term for social security b comprised of social security contribution payroll taxes as well as medicare health care for the 65 and older population if not working c this is chart from past years showing that every year wage base goes up this is how they keep people paying more and more on both bc they are having financial difficulties IX Tax Rates X MARGINAL is highest tax rate on any one level of income 4 dif tax schedules a marginal tax rate is rate paid on last bracket of dollars last dollar of income earned On first 8 900 if income goes up above that then you pay 15 cents for every extra dollars then you pay extra 25 cents then 28 then 33 then 36 and THIS YEAR its 39 6 cents 7 tax rates what we have happening to try and keep people from making math errors if they have to use tax rate schedule only if their income is ABOVE GREATER THAN 100 000 do you use tax rate schedules use this for tax planning during the year this is like your highest exam score XI Marriage Penalty Bush in his presidencies tried to combat marriage penalty but bc of this would get divorcedincreased the standard deduction of marries and singles so it was helping people avoid it divorce take tax savings and then get remarried in January