Personal Finance Unit 8 Taxes

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 federal tax form filled out by an employee to indicate the amount that should be withheld from his/her paycheck for taxes.

Standard Deduction

A stated amount that you may subtract from adjusted gross income instead of itemizing your deductions

W-2

A statement of an individual's annual wages and taxes provided by an employer that must be included with the employee's federal, state, and city income tax returns.

Real Estate Tax

A tax assessed on real estate by the local government. The tax is usually based on the value of the property (including the land) you own.

Tax Bracket

A tax bracket is a range of income amounts that are taxed at a particular rate.

Allowances

Employee-claimed exemptions on the W-4 to determine how much of an employee's pay to subtract from his or her paycheck. The more allowances you claim, the less income tax will be withheld from your paycheck. The fewer allowances you claim, the more income tax will be withheld from each paycheck.

Medicaid

Federal program that provides medical benefits for low-income persons.

Social Security

Money collected by the federal government to provide financial benefits needed in retirement and for the disabled.

Medicare

Money collected by the federal government to provide health insurance benefits in retirement, and to certain individuals with disabilities or serious illnesses.

Dependent

Someone you financially support who can be "claimed" on a tax return to reduce your taxable income and lower your taxes

Income Tax

Tax paid to the state, federal, and local governments based on income earned over the past year.

1040

The standard Internal Revenue Service (IRS) form that individuals use to file their annual income tax returns.

Progressive Tax System

a tax whose average tax rate increases as the taxpayer's income increases and decreases as the taxpayer's income decreases