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Federal Income Tax Section 2.1.

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1 Federal Income Tax Section 2.1

2 Federal taxes are used to keep government agencies and services running.
The federal income tax is the amount of money one has to pay the government based on the situation.

3 Federal income tax will vary depending on a few things…
Marital status Withholding allowances

4 Over to 2 Allowances Down to $520 - $530 Amount Withheld: $25.00
Suppose Joe’s gross pay is $ His is married so he claims two allowances. How much will be withheld from his pay for FIT? Over to 2 Allowances Down to $520 - $530 Amount Withheld: $25.00

5 Over to 3 Allowances Amount Withheld: $75.00
Suppose Joe claimed three allowances, and his employer withheld $75. How much does Joe make a week? Over to 3 Allowances Amount Withheld: $75.00 Income Amount: $ to $940

6 State Income Tax Section 2.2

7 Along with the federal income tax there are also state income taxes that are required to be paid.
These can be withheld from your income as well.

8 Taxable wages depend on personal exemptions or “withholding allowances”

9 Figuring out taxable wages…
Taxable Wages=Annual Gross Pay-Personal Exemptions

10 Figuring annual tax withheld…
Annual Tax Withheld=Taxable Wages*Tax Rate

11 Tax. Wages = Ann. Pay - Exemptions
Frank’s gross pay is $60,000 a year. The state income tax rate is 5%. He takes a married exemption. How much is withheld from his earnings for state income tax? Tax. Wages = Ann. Pay - Exemptions Tax. Wages = 60,000 – 4,000 Tax. Wages = $56,000 Tax Withheld = Tax. Wages x Tax Rate Tax Withheld = 56,000 x 0.05 Tax Withheld = $2,800.00

12 Tax. Wages = Ann. Pay - Exemptions
Sherman’s gross pay is $39,250 a year. The state income tax rate is 4%. He is single with two dependents. How much is withheld from his earnings for state income tax? Tax. Wages = Ann. Pay - Exemptions Tax. Wages = 39,250 – 6,000 Tax. Wages = $33,250 Tax Withheld = Tax. Wages x Tax Rate Tax Withheld = 33,250 x 0.04 Tax Withheld = $1,330.00

13 Lesson 04: Federal and State Income Tax
Questions? Summarize your notes Homework Google Classroom

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