SECTION 2-2 State Income Tax pp.119-121.

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Presentation transcript:

SECTION 2-2 State Income Tax pp.119-121

Key Words to Know personal exemptions (p. 119) The number of people an employee supports, on which taxes are based, also called withholding allowances.

Formula 1 How do I calculate taxable wages? Taxable Wages = Annual Gross Pay – Personal Exemptions

Formula 2 How do I calculate annual taxes withheld? Annual Tax Withheld = Taxable Wages × Tax Rate

Example 1 Kara Fox’s gross pay is $65,800 a year. The state income tax rate is 3 percent of taxable wages. Kara takes a married exemption for herself and her husband. Use the Personal Exemptions table below to find out how much is withheld from her gross earnings for state income tax within the year.

Example 1 (cont.) Personal Exemptions Single: $1,500 Married: 3,000 Each Dependent: 700

Example 1 Answer: Step 1 Find the taxable wages. Annual Gross Pay – Personal Exemptions $65,800.00 – $3,000.00 = $62,800.00

Example 1 Answer: Step 2 Find the annual tax withheld. Taxable Wages × Tax Rate $62,800.00 × 3% = $1,884.00

Homework Pg. 120: 1-8, 9-15 odd END OF SECTION 2-2 State Income Tax