Personal Financial Literacy

Sales Tax https://www.youtube.com/watch?v=6Q3NPgHZzDo

7.13A Calculating Sales Tax and Income Tax I can… calculate the sales tax for a given purchase and calculate income tax for earned wages.

What is sales tax? Tax imposed on goods or services by state local governments that is collected by companies

How do I calculate sales tax? Convert the sales tax percent to a decimal. (remember to move the decimal two places to the left) Multiply the subtotal and the decimal from step 1. Round to the nearest hundredth. (two decimal places)

Sample sales tax problem-solving scenario Millicent purchased a pair of sunglasses for $29.50. The sales tax rate in her city is 8.5%. How much will she pay for the sunglasses (including sales tax)?

Millicent purchased a pair of sunglasses for $29. 50 Millicent purchased a pair of sunglasses for $29.50. The sales tax rate in her city is 8.5%. How much will she pay for the sunglasses (including sales tax)? Convert the sales tax percent to a decimal. (remember to move the decimal two places to the left) 8.5% 0.085

Multiply the subtotal and the decimal from step 1. 29.50 x 0.085 Millicent purchased a pair of sunglasses for $29.50. The sales tax rate in her city is 8.5%. How much will she pay for the sunglasses (including sales tax)? Multiply the subtotal and the decimal from step 1. 29.50 x 0.085 250750 2.50750 Don’t forget your decimal places. There are a total of 5 in the problem so there needs to be 5 in the answer.

Round to the nearest hundredth. (two decimal places) Millicent purchased a pair of sunglasses for $29.50. The sales tax rate in her city is 8.5%. How much will she pay for the sunglasses (including sales tax)? Round to the nearest hundredth. (two decimal places) 2.50750 2.51

Millicent purchased a pair of sunglasses for $29. 50 Millicent purchased a pair of sunglasses for $29.50. The sales tax rate in her city is 8.5%. How much will she pay for the sunglasses (including sales tax)? So, we calculated the sales tax but the problem wants the final price of the sunglasses. That means we need to add the sales tax to the cost of the sunglasses. 29.50 + 2.51 $32.01

What is income tax? Tax imposed on an individual’s taxable income by local, state, and federal governments. Not all local or state governments impose income tax.

How do I calculate income tax? (using table) Calculate the taxable income (gross income – deductions) Review tax table to find tax owed If: amount owed > amount paid in federal withholding, the individual pays additional taxes. amount owed < than the amount paid in federal withholding the individual gets a refund. Subtract any federal withholding from the from tax owed to find the additional tax owed or the refund amount federal withholding is money employers deduct and send to the federal government

Sample income tax problem-solving scenario Hank works for 20 hours per week and earns $15 per hour. Federal withholding is 14.7% of Hank’s gross pay. He also has $45 deducted for Social Security and Medicare. What is Hank’s net income per week?

Hank’s federal withholding is $44.10 Hank works for 20 hours per week and earns $15 per hour. Federal withholding is 14.7% of Hank’s gross pay. He also has $45 deducted for Social Security and Medicare. What is Hank’s net income per week? Before we can find the net income, we need to find Hank’s gross income (what he makes before deductions) and his federal withholding amount. To find gross income we need to find out how much he makes in one week: 20 x 15 300 Hank’s gross income is $300 We can use a proportion to find Hank’s federal withholding: 14.7 X_ 100 300 100X=4410 100 100 X=44.1 = Hank’s federal withholding is $44.10

Hank works for 20 hours per week and earns $15 per hour Hank works for 20 hours per week and earns $15 per hour. Federal withholding is 14.7% of Hank’s gross pay. He also has $45 deducted for Social Security and Medicare. What is Hank’s net income per week? Now we can find Hank’s net income by first subtracting his deductions then subtracting his federal withholding. 300 - 45 255.00 - 44.10 210.90 Gross Income Deductions Hank’s net income is $210.90 Federal Withholding

Hank works for 20 hours per week and earns $15 per hour Hank works for 20 hours per week and earns $15 per hour. Federal withholding is 14.7% of Hank’s gross pay. He also has $45 deducted for Social Security and Medicare. What is Hank’s net income per week? Let’s see if Hank will owe taxes or get a refund when he calculates his income tax… Step 1: Calculate the taxable income (gross income – deductions) *we did this in the last slide: 255* This amount is per week. There are 52 weeks per year. Step 3: Determine if there is are taxes owed or a refund (To do this we need to find out Hank’s federal withholding for the year) The amount owed is less than the amount paid in federal withholding, so Hank gets a refund. 44.10 x 52 2293.20 255 X 52 13260 1530 < 2293.20 Step 2: Review tax table to find tax owed Step 4: Subtract any federal withholding from the from tax owed to find the additional tax owed or the refund amount 1530 – 2293.20 = 763.2 Taxable income Tax owed At least But less than Tax due 13,150 13,200 1,515 13,250 1,523 13,300 1,530 Hank will get a refund of $763.20