Income Tax Bracket
(No, you don’t get to keep all that money)
If you work, you’re going to have to pay taxes. The government takes a good chunk of your precious
paycheck, on both the federal and state levels. That’s right. You get taxed twice. And then you have to
pay for Social Security (govt. sponsored retirement). This means that what you thought you’d be
making…you’re not. Here they are:
STATE TAXES: This changes from state to state.
For this project, you will use a state tax of 9.3%, unless you happen to live in one of the
states where there is no state income tax. BUT, for the purposes of this project, you will have to
pay state income taxes. So you’ll need to find 9.3% of whatever your TAXABLE INCOME is and
deduct that from your total.
Example:
If you make $50,000 a year, you would pay (.093)(50,000) or $4,650
in state taxes. So instead of $50,000, you’re down to $45,350
Social Security: This is government funded retirement income; everyone has to pay it so when you get
old and can’t work anymore, you still have money. So you pay a little out of your paycheck while you are
working now! For our purposes, you will pay 7.5% on your yearly TAXABLE INCOME.
Example: If you make $50,000 a year, you would pay (.075)(50,000) or $3,750
FEDERAL INCOME TAX: This is the big chunk and most complicated! So, Bewar The more money
you make, the more you pay! Here is the basic idea and way to calculate your federal taxes. First, take
your gross salary and subtract your deductions (this depends on each individual person such as single,
married, children, no children) and personal exemptions to get your TAXABLE INCOME. This number
is what the government taxes you on. Use the following table to figure your tax bracket and how much
you will pay in taxes: (see http://www.fairmark.com/refrence/index.htm#keytax)
First, complete these questions to calculate YOUR TAXABLE INCOME:
1. What is your gross salary?
__________________
2. Are you married?
__________________
3. Personal Exemptions: If YES, enter $7,300. If NO, enter $3,650.
__________________
4. Standard Deductions:
i. Single, enter $5,700
ii. Married, enter $11,400
iii. Head of Household, enter $8,350
__________________
5.
Total Items #3 & #4
_________________
Dependents (Children) (do this section only if you have children)
6. How many children do you have?
7. Dependent: Personal Exemption Multiply answer (6) by $3,650 and enter
8. Dependent: Standard Deduction Multiply answer (6) by $950 and enter
9. Total Items 7 & 8
_______________
_________________
_______________
_______________
10. Total Deductions:
_______________
Add Items #5 & #9
11. Taxable Income: Subtract Item #10 (Total Deductions) from Item #1 (Gross Salary)
i.
Your Taxable Income
Use this Chart if you are SINGLE (Not Married) and no children
Based on 2009 tax rate for SINGLE income earners. If married, See MARRIED FILING JOINTLY chart!
Taxable Income is over
$0
$8,350
$33,950
$82,250
$171,550
$372,950
But not over…
The tax is…
$8,350
$33,950
$82,250
$171,550
$372,950
Of the amount over…
Plus
10%
15%
25%
28%
33%
35%
$0
$835
$4,675
$16,750
$41,754
$108,216
$0
$8,350
$33,950
$82,250
$171,550
$372,950
For example, if you earn $80,000 a year.
Taxable Income: $80,000 - $9,350 (Deductions) = $70,650
You are in the 25% tax bracket!
You pay $4,675 in taxes plus 25% of the amount over $33,950 which is $70,650 - $33,950 = $36,700.
Now multiply .25 times $36,700 = $9,175
Federal Taxes you pay:
$4,675
.25($31,000)= $9,175
$13,850 Federal Taxes you pay
Use this Chart if you are MARRIED.
Married Filing Jointly
Taxable
income is
over
$0
16,700
67,900
137,050
208,850
372,950
But not over
16,700
67,900
137,050
208,850
372,950
The tax is
Plus
Of the amount over
$0.00
1,670.00
9,350.00
26,637.50
46,741.50
10%
15%
25%
28%
33%
$0
16,700
67,900
137,050
208,850
100,894.50
35%
372,950
For example, if you and your spouse earn $145,000 combined with no children.
Taxable Income: $145,000 - $18,700 (Deductions) = $126,300 You are in the 25% tax bracket!
You pay $9,350 in taxes plus 25% of the amount over $67,500 which is $126,300 - $67,500= $58,800.
Now multiply .25 times $58,800 = $14,700
Federal Taxes you pay:
$9,350
.25($58,800)= $14,700
$24,050 Federal Taxes you pay
Bringing It All Together….
For your Personal Finance Page, you will need to show the calculations you made for your salary. This
includes showing ALL your work. A chart like the one I just showed you should be made for the federal
income tax, computing the total amount to be deducted. Then you need to figure out what
percentage that is of your entire salary. (Don’t Forget this!) You also need to show your work
for computing the State Taxes and Social Security. This should look professional and neat! No pencil
scratching. Show your work and then put it in a table and maybe even display it as a pie graph.
As you can see, what you earn is not what you get to take home!
Try it yourself on the space below. If you figured them out, you’re ready to go. The final product will be
graded on presentation and accuracy, so double check your work. If you calculate your taxes wrong, the
IRS (Mr. Holmes and Mrs. Hetrick) will levy tax penalties!
Tax Calculation Worksheet
Your Salary:
minus $________ =
Your taxable income
Deductions
Federal Tax:
State Tax:
Social Security Tax:
divide by12__________
divide by12_________
divide by 12________
See Tax Rate Chart! Find your tax
bracket and see amount you pay
and then calculate the amount over
the bottom amount to add to the tax
you pay….
Net Income:
(Salary – All Taxes)
***Note: The above figures will each need to be divided by 12 to put into your Personal Monthly Budget!