16 - 32 Finance

Social Security

A federal program that provides monthly benefits to millions of Americans, including retirees, military families, surviving families of deceased workers, and disabled individuals

Progressive Tax

A tax system that uses tax brackets to collect a larger percentage from the income of high-income earners than it does from low-income earners

Payroll Tax

Federal and state taxes that all employers must pay, based on a percentage of the employee's salary, toward social services such as Social Security and Medicare

Paycheck Stub

A document attached to every paycheck that details your earnings and the amount withheld for taxes, health insurance, retirement funds, etc.

Federal Insurance Contributions Act (FICA)

A federal law that requires an employer to withhold taxes from the wages they pay their employees; the funds go toward Social Security and Medicare

W-4

A form completed by an employee to indicate his or her tax situation (exemptions, marital status, etc.) to the employer, who then withholds the corresponding amount of taxes from each paycheck

Medicaid

A government-run insurance program that provides healthcare assistance to elderly and disabled Americans

Tax Bracket

A range of income amounts that are taxed at a particular rate

Standard Deduction

A standardized dollar amount that reduces your taxable income, specifically for individuals who do not receive additional benefit by itemizing their deductions into medical expenses, donations, etc.

W-2

Form that an employer must send to an employee and the IRS at the end of the year to report the employee's annual wages and taxes withheld from their paycheck

Mandatory Spending

Spending by the federal government required by previously existing laws, including funding programs like Social Security and Medicare/Medicaid

Taxable Income

The amount of income that is used to calculate an individual's or a company's income tax due

Tax Rate

The percentage at which taxes are paid on each dollar of income

Withholding

The portion of an employee's wages that is not included in their paycheck because it goes directly to federal, state and local taxes

Marginal Tax Rate

The tax bracket that your highest dollar of income falls into, and therefore the highest tax rate you pay