1. Personal Finance Taxes
Bill Klinger

2. Personal Finance Review Cash flow Balance sheet Net worth
Time value of money PV FV
Annuity
Payment
Non-annual payments

3. Taxes FICA Sales tax Estate / Inheritance tax Income tax
Federal Insurance Contributions Act
Paid by both employer and employee
Social Security
6.2% of income up to $110,000 in income
Medicare
1.45% of income
Sales tax
6.875% in NJ
Not on unprepared food, paper products, medicine, clothing
Estate / Inheritance tax
Income tax

4. Income Tax Gross income Adjusted gross income (AGI) = earned income
+ interest
+ dividends
+ capital gains (short and long-term)
Adjusted gross income (AGI)
= Gross income
- Alimony
- Interest on student loans
- IRA
- Tuition

5. Income Tax Deductions Exemptions Taxable Income
Interest expense (e.g. mortage)
State income tax
Real estate tax
Charitable contributions
Other
Exemptions
Deductions for dependants
Taxable Income
= Adjusted gross income (AGI)
- Deductions
- Exemptions

6. Income Taxes Calculating
Tax brackets
“Progressive”
Tax on ‘base’ + percentage over ‘base’
Marginal vs. average tax rate
Example
Text p

7. Income Tax Credits Full amount subtracted from tax due Credits for
Children
College expenses
Contributions to fund for education expenses
Cloverdale
529

8. In Class In groups of two
Calculate the tax due if the taxable income is $75,000 for a married couple.
What is the marginal tax rate?
What is the average tax rate?
Calculate the tax due if the taxable income is $45,000 for a married couple.
Calculate the tax due if the taxable income is $200,000 for a married couple.