Entrepreneurship

Taxes

Taxes

• Taxes – Fees charged by the government on products, activities, or income

• Different types of taxes:– Sales Tax– Excise Tax– Property Tax– Income Tax

Sales Taxes

• Sales Tax – Imposed by many states, counties, and cities on purchases

• See Lorain County Tax Rate

Excise Taxes

• Excise Taxes (Sin Tax) – A state or federal tax placed on non-essential consumer goods– Tobacco Products– Alcohol– Gasoline– Hotels– Sometimes Restaurants

Property Taxes

• Property Taxes – Tax paid by people who own items such as homes, land, and vehicles to the city and/or county where the property is located.– Roughly 30 % of the money collected is used to

pay the cost of running public schools– Taxed is based on the Assessed Value (the amount

the property is worth by city or county assessors)

Income Taxes

• Income Taxes – Tax paid on the money one earns from working– Charged by Federal, State, and Local Governments– Progressive Tax – Tax rates increase as the amount

of taxable income increases– W4 Form – Employee’s Withholding Allowance

Certificate– Tax Forms – 1040EZ, 1040A, and 1040

Income Taxes

• Exemptions – Items that can be deducted from one’s total income before taxes are assessed– Personal Exemptions – Exemption for someone

who cannot be claimed as a dependant by another taxpayer

– Dependent Exemption – Exemption for someone who relies on the taxpayer for support including food, clothing, and shelter

Income Taxes

– Deductions – Amount subtracted from taxable income

– Itemized Deductions – A list of items that can be deducted from total income

– Standard Deduction – Flat amount deducted from total income

Withholdings

• Payroll Taxes – Deductions from the wage earner’s gross pay by the employers and used to fund federal government programs– Social Security• Designed to provide retirement and disability income

for those meeting the specified criteria– 6.2%

– Medicare• Pays for health insurance for citizens over age of 65

– 1.45%