Chapter 6- Financial literacy

Personal income taxes

tax on money that you earn

Gross pay

the total amount of money that you actually earn

adjusted gross income

total income subtracted from certain allowable amounts

Gross income

total income, consists of income from all sources.

Capital gains

when you sell an item for more than what you paid for

What does FICA stand for?

Federal Insurance Contributions Act

TRUE OR FALSE: your employer has to match the FICA taxes taken from your check.

True

real estate tax

based on value of property, government will send them a bill. used to fund local schools.

Internal Revenue Service (IRS)

government body that carries out tax laws

tax return

is to report to the IRS all the info relative to your income taxes

tax

money collected by the government for the government

payroll taxes

money taken out of a check from your employer for FICA (medicare and social security

What percentage is taken out of your check for medicare?

1.45

What percentage is taken out of your check for Social Security?

6.2

What is another name for Net Pay?

Take home pay

standard deduction

a fixed amount all people are allowed to deduct from their AGI to reduce their tax liability

Sales tax

purchase made at the store

Itemized deductions

specific expenses that, under tax law, can be deducted from income to reduce the amount of income subject to income tax