3/24/14 “Deductions, credits, & dependents” 1.What is the difference between a tax deduction and...
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Transcript of 3/24/14 “Deductions, credits, & dependents” 1.What is the difference between a tax deduction and...
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3/24/14
“Deductions, credits, & dependents”
1.What is the difference between a tax deduction and a tax credit?
2.What is a dependent & how do they effect your taxes?
On desk: Deductions & credits wksht.
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Earn: $50,000 Owe in taxes: $10,000
Deductionsreduce amount $$ you are TAXED ON.
Creditsreduce amount $$ you OWE in taxes.
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What is a dependent & how do they effect your taxes?
dependent:•Someone who depends on you to live (child, grandma, cousin, etc.)
•The more dependents you can claim, the more money you save on your taxes! (dependent credits)
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How much would your standard deduction be if you filed your taxes today?
•Single = $6,100•Married = $12,200
What is the difference between nonrefundable tax credits and refundable tax credits?
Nonrefundable:• can reduce tax liability to zero, but not below
•Refundable:• can reduce tax liability below zero, which means…?• Govt. can end up owing you money!
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Deductions($ reduces income subject to tax)
Credits($ reduces amt. of tax owed)
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3/24/14
Econ. Agenda
1.How to file your taxes, part one (class notes)
2.Adjusted Gross Income tax problems
HW: finish AGI tax problems # 1 – 3
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3/24/14 Class notes – how to file your taxes
•Need at least 3 things:1. Personal info. for you and your dependents
(SSN, date of birth, address, etc.)2. W-2 form – statement of your wages for past
year3. Correct tax form
•Need to file BOTH Federal & State tax forms every year!
•Tax due date?• April 15th!
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985869493
576-98-4356
Google, Inc.
1600 Amphitheatre Parkway
Mountain View, CA 94303
Niza Hernandez
300 Primavera Street, Apt. A
Impuesto, CA 90000
76,500.00
76,500.00
76,500.00
8,415.00
5,355.00
1,530.00
2,295.00CA 76,500.00 765.0076,500.00
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3/24/14 Class notes – how to file your taxes
•Adjusted Gross Income (AGI)• Amount of income you are taxed on (basically)
• Total income minus all of your deductions
• Income = $50,000• Standard deduction = $6,100• Student loan interest deduction = $1,500• Charitable contribution to RIPR = $150• Total amount in deductions?• = $7,750
• AGI = $50,000 – $7,750 = $42,250
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3/24/14 Class notes – how to file your taxes
•What form do I need to file my taxes?
•3 forms to choose from (federal taxes):
1. 1040 EZ• Shortest, least complicated:• Under $100,000 income, no dependents, under age 65,
single or married filing jointly…
2. 1040A• Medium length, more complicated:• Same as 1040EZ but…any age, can claim dependents,
owning stocks & other investments…
3. 1040
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3/24/14 Class notes – how to file your taxes
•What form do I need to file my taxes?
•3 forms to choose from (federal taxes):
3. 1040•Longest, most complicated:•Any marital status, over $100,000 income, sold property, self employed, greater than $1500 in interest earned…
•How do I file my taxes?• Online or paper (online refund comes faster)• Self with tax forms, pay a professional, or pay TurboTax,
etc.
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1040-EZ• Short• Marital status– Single,
married filing jointly
• Age – >65
• Dependents– none
• Interest income– <$1,500
• Taxable income– <$100,000
1040A• Medium• Marital status
– Single, married filing jointly
• Age – Any
• Other– Retirement
payments– Own stocks– Student loans
• Dependents– yes
• Interest income– <$1,500
• Taxable income– <$100,000
1040• Long• Marital status
– married filing separately, divorced
• Other– Self-employed– Sold property– Own stocks– YES itemized
deductions• Interest income
– >$1,500• Taxable income
– >$100,000
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If taxable income is more than …
but notmore than … the tax is …
$0 $8,925 10% of the taxable income
$8,925 $36,250 $892.50 plus 15% of the amount over $8,925
$36,250 $87,850 $4,991.25 plus 25% of the amount over $36,250
$87,850 $183,250 $17,891.25 plus 28% of the amount over $87,850
$183,250 $398,350 $44,603.25 plus 33% of the amount over $183,250
$398,350 $400,000 $115,586.25 plus 35% of the amount over $398,350
$400,000 no limit $116,163.75 plus 39.6% of the amount over $400,000
SingleAdjusted Gross Income Federal Tax Rates, 2013
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Example: You are single and earn $89,000 as a plumber. You get the standard deduction amount of $6,100 and a child tax credit of $1,000. What is your AGI and how much money do you owe in taxes?
Income = $89,000
Deductions? $6,100
AGI = $89,000- $6,100
AGI = $82,900
Amount of tax owed?AGI = $82,900
$4,991.25 plus 25% of the amount over $36,250
$4,991.25- $36,250$46,650X .25$11,662.50
+ $11,662.50
Tax owed = $15,653.75
$16,653.75
Tax credits?$16,653.75- $1,000.00