1. Personal Financial Literacy

2. Sales Tax

3. 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.

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

5. 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)

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

7. Millicent purchased a pair of sunglasses for $29. 50
Millicent purchased a pair of sunglasses for $ 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%

8. Multiply the subtotal and the decimal from step 1. 29.50 x 0.085
Millicent purchased a pair of sunglasses for $ 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
Don’t forget your decimal places. There are a total of 5 in the problem so there needs to be 5 in the answer.

9. Round to the nearest hundredth. (two decimal places)
Millicent purchased a pair of sunglasses for $ 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)

10. Millicent purchased a pair of sunglasses for $29. 50
Millicent purchased a pair of sunglasses for $ 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 $32.01

11. 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.

12. 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

13. 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?

14. 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: X_
100X=4410
X=44.1 =
Hank’s federal withholding is $44.10

15. 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
210.90
Gross Income
Deductions
Hank’s net income is $210.90
Federal Withholding

16. 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
255 X
13260
1530 <
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 – = 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