1. Entrance Ticket
What is the difference between progressive and flat taxes?
Using your chart from last class, calculate how much in federal income tax a millionaire pays

2. EQ: What does it mean to be financially literate?
Agenda
1) State of the Union
2) Notes on Tax Returns (Printed Out)
3) Tax Return Research
4) Exit Ticket
EQ: What does it mean to be financially literate?

3. State of the Union What is it for? Watch clip & Fill out sheet
What did Obama say? Watch SOTU 2016 in 2 minutes
Reflect: What was the most important issue he raised?

4. Deductions:
Expenses that reduce amount of income that is taxed
Example: $50,000 income
Tax rate = 25%
Tax liability = (50,000)(.25) = $12,500
BUT…you can deduct the $1,500 you paid in student loan interest!
NOW income = $50,000 – 1,500 = $48,500
Tax liability = (48,500)(.25) = $12,125

5. Deductions (DO NOT NEED TO WRITE):
Examples of deductions:
Standard deduction – fixed number set by govt. ($6,100 for single people in 2013)
Charitable contributions
Student loan interest payments
Business expenses (if self-employed)
Many more…but taxes get more complicated!

6. Tax credits:
Reduce amount of tax you need to pay (tax liability)
Example: $50,000 income
Tax rate = 25%
Tax liability = (50,000)(.25) = $12,500
BUT…you can claim the Higher Education Credit of $1,000 for attending college!
NOW tax liability = $12,500 – 1,000 = $11,500

7. What is the difference between a tax credit & tax deduction?
Income = $50,000 Tax liability = $12,500

8. Tax credits:
Examples of credits:
Higher education (American Opportunity Credit)
Energy Savings – making home energy efficient
Savings for retirement
Adoption
Earned Income Credit (EIC) – low-income workers

9. How do I file my tax returns?
Research deductions & credits
Choose 4 deductions & 5 credits to research

10. Exit Ticket
How can tax credits and tax reductions boost your tax returns? Explain.