Financial LiteracyTaxes and Insurance

Bank

ing

Follo

w Up

Checking Accounts:Emily, Jocelyn, JarekSavings Accounts:Robert, Anastasia, Greg

Money Markets & CD’sSarah, Jonah, Alex

Taxes

Wha

t are

the

diffe

rent

type

s of

taxe

s?

Taxes on your Income• Federal Taxes• State and Local Taxes• FICA Taxes

Taxes on your Investment Gains• Capital Gains Taxes

Vide

oYouTube - Personal Income Taxes - A Visual Explanation

Taxe

s on

your

In

com

e

If you earn money you owe certain taxes on that money.

Money is withheld from your paycheck and automatically sent to the government for these taxes.

You then file a tax return by April 15 of the next year to calculate your taxes and see if you’ve had enough withheld.

Taxe

s on

your

in

com

e

This applies to Federal and

State TaxesIt does not apply to FICA Taxes

FICA Taxes are taxes for:• Social Security (6.2%)• Medicare (1.45%)

The

Fede

ral T

ax R

etur

nFo

rm: 1

040

The

Fede

ral T

ax R

etur

nFo

rm: 1

040

The

Fede

ral T

ax R

etur

nFo

rm: 1

040

The

Fede

ral T

ax R

etur

nFo

rm: 1

040

In P

lain

Eng

lish

Income

Taxable Income

Deductions

Federal Tax

Antonio’s Salary: $43,000Interest Earned on CD: $300

Total Income: $43,300

Standard Deduction: $5,650Exemption Deduction: $3,650

Total Deductions:$9,300

Income – Deductions: $34,000

The first $8,375 is taxed at 10% $837From $8,375 to $34,000 is taxed at 15% $3,844Federal Tax: $4,681

In P

lain

Eng

lish Federal Tax

Federal Tax: $4,681

Federal Tax WithheldFederal Tax Withheld:

$5,000

Refund or Amount DueAmount withheld – Federal Tax:

Refund of $319

Exam

ples

Let’s review Antonio’s tax situation

Insurance

Wha

t is

insu

ranc

e?

Definition:

An agreement by which a company provides a guarantee of repayment for a specific loss in return for a customer’s payment of premium.

Wha

t is

insu

ranc

e?

Basic Example:If you pay your monthly premium for your car insurance, when you get in an accident your insurance company will help fix your vehicle.

Diffe

rent

Type

s of

Insu

ranc

e

Health Insurance:If you get sick and need to

see a doctor, your health insurance will help you pay the cost.Car Insurance:

If you get in a car accident, your car insurance will help

fix your car.

Home Insurance:If someone breaks into your house, your home insurance will help pay to replace the

items that were stolen.

Diffe

rent

Type

s of

Insu

ranc

e Life Insurance:If you pass away, the

insurance company will pay money to your family.

Disability Insurance:If you become disabled and cannot work, the insurance company will pay money to

you every month to help you pay bills.

Why

is In

sura

nce

Impo

rtant

? If you drive a car…You are required to have insurance.

If you own a home…You are required to have insurance.

If you ever get sick…Not having health insurance is

the # 1 cause of bankruptcy.

If you are married, have kids, or in debt…

Life Insurance can help replace the income that your family depends on, or help pay off debt that your loved ones would still have.

Car I

nsur

ance

6 Components of Car Insurance

1) Bodily Injury Liability2) Property Damage

Liability3) Medical Payments4) Collision5) Comprehensive6) Un/Underinsured Motorist

Homework