Reference no: EM133981061

Problem

SPEAKER: You know when a teacher says, you're going to use this later in life, and you roll your eyes, well, every year without fail, you will need to know how to calculate your taxes. So pay attention. The four main types of taxes are income, payroll, property, and sales. Let's check out how these taxes are determined

Let's start with income taxes. Income taxes are a payment you make to the government based on a couple of factors in addition to what you earn. When you get a job, you will fill out a form called a W-4. The W-4 form asks questions like if you're married or single, how many dependents you have, and how many jobs you have. Get the instant assignment help.

Next is payroll taxes, a.k.a. employment taxes. These are taxes that the businesses pay on employee wages and fund government programs, like Social Security and Medicare. But I've got good news. Some payroll taxes are split by you and your employer.

For example, as of 2023, the Social Security tax rate is 12.4% of wages. So that is split between the employee and the employer, 6.2% each. Then the Medicare tax rate is 2.9% of wages. So split 50-50, the employee and the employer will pay 1.45% each. Payroll taxes are paid each pay period and come right out of your paycheck, just like income withholdings on your pay stub each pay period.

There's also property tax. Property taxes are what you pay every year for owning land or buildings. And the amount varies based on the value of your property. That means where you live can make a significant impact on how much you pay. Why? The more valuable your property is, the more you pay. Local government determines the property tax rate. Property owners can then decide to pay the tax as part of their monthly mortgage payment or as an annual lump sum.

Finally, there are sales tax. Sales tax is the money you pay for purchasing a good or service. You pay this all the time. Sales tax also varies depending on where you live. The amount of sales tax is automatically calculated based on where you purchase goods and services and will show up as a line item on your receipt.

There you have it. As you can see, a lot of math is done for you. But knowing what to expect makes you financially smart.

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