Copy of Copy of Calculate What Affects How Much We Pay in Taxes PDF

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this isnt real and its just so i can look at answers without having to pay for them. Do not use these for that course...

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NGPF Activity Bank Taxes Spanish version

CALCULATE: What Affects How Much We Pay in Taxes? Everyone has to pay taxes, but how much you pay depends on a lot of factors. In this activity, explore how three factors (your salary, the state you live in, and the cost of living) can have a big impact on how much you pay in taxes and how much you have leftover to spend on yourself. Part I: Your Salary The biggest variable in the amount of taxes you pay is how much you make. Use Nerdwallet's Federal Income Tax Calculator to compare the two individuals below and see how their tax burdens differ due to a large difference in salary.

Meet Marcel ●

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Meet Stephanie

Marcel is in his first job after college, working at City Center Bank as a teller. He is not married, nor does he have any dependents He will be 23 on Jan 1 of the current year Marcel’s wages (regularly taxed income) is $35,000

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Stephanie has been working at City Center Bank for 5 years. She is now an assistant manager. She is not married, nor does she have any dependents She will be 28 on Jan 1 of the current year Stephanie’s wages (regularly taxed income) is $50,000

Neither has withheld any money towards federal or state taxes, and has no unemployment income1 Neither is being claimed as a dependent by their parents or anyone else Neither contributes to a 401(k) or IRA Both will use the standard deduction of $12,400

1 - Most people have money withheld from each paycheck to avoid paying a huge bill at the end of every year. We’re assuming no withholdings to illustrate the total amount in taxes paid throughout the year. **Note - For this portion of the activity, we are only calculating Marcel and Stephanie’s federal taxes. We will tackle state taxes in the next part.

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Last updated: 12/30/20

Marcel

Stephanie

1. Using Nerdwallet Federal Income Tax Calculator, what is the estimate for much this individual owes in taxes?

$2,514

$4,314

2. What is this individual’s taxable income?

$22,600

$37,600

3. What is this individual’s effective tax rate?

7.18%

8.63%

4. Why are Marcel’s and Stephanie’s taxable incomes less than their annual salaries? Usually less because of deductions that reduce it.

5. What is the difference in their tax burdens? It's lower

Part II: What State You Live In Another factor that greatly affects your taxes is the state you live in. Different states have different tax rates for a variety of taxes. In this activity, we will focus exclusively on income tax rates. To do this, we are going to use the State Tax Calculator. Follow these directions: ● Find the correct state and click the salary value you want to see the income tax for. ● Under the “Yearly” column, find the value for “[State Name] State Income Tax”

Marcel First, let’s assume that Marcel lives in California. 6. How much would Marcel pay in state income tax? Marcel would pay $733.42 in state income tax.

Now, what if Marcel lived in Oregon instead? 7. How much would Marcel now pay in state income tax? Marcel would pay $2,483.10 in state income tax

Stephanie First, what if Stephanie lives in California? 10. How much would Stephanie pay in state income tax? Stephanie would pay $1,630.46 in state income tax

Now, what if Stephanie lived in Oregon instead? 11. How much would Stephanie now pay in state income tax? Stephanie would pay $3,671.10 in state income tax.

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Last updated: 12/30/20

8. How much more is Marcel paying if he lives in Oregon? (Federal taxes are the same in each state)

12. How much more is Stephanie paying if she lives in Oregon? Stephanie would be paying $2,040.64 more

Marcel is paying $1,749.68 more

9. What percentage of his salary is Marcel sacrificing if he lives in Oregon instead of California? (State tax difference/$35,000)*100

13. What percentage of her salary is Stephanie sacrificing if she lives in Oregon instead of California? (State tax difference/$50,000)*100

10% less 15% less

14. Was the impact greater for Marcel or Stephanie? What does that tell you about who is affected more by states with higher taxes, the rich or the poor? The greater impact was for Stephanie, the more money she has/makes the higher % of taxes she is taxed by the government.

Part III: The Cost of Living While taxes vary by state, another factor to keep in mind is cost of living, defined as “the amount of money needed to sustain a certain level of living.” It includes things like the cost of housing, food, transportation, and more. In this activity, let’s compare how costs vary between different locations using NerdWallet's Cost of Living Calculator. To compare cost of living: ● ● ●

Input one location in the “I currently live in” box Input the other location in the “I want to live in” box Enter your current income

Let’s use Marcel as our test case. Let’s say that Marcel was trying to see the difference between living in San Francisco, CA and Portland, OR. Use the Cost of Living Calculator to determine the price of a few items in each place and the difference in costs. Remember, he makes $35,000/year. Product Cost

San Francisco, CA

Portland, OR

Difference

2-Bed Apt. Rent

$4,128

$2,679

32%

Gasoline

$3.82

$3.22

10%

Dozen Eggs

$3.49

$3.22

10%

Gallon of Milk

$2.34

$2.12

10%

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Movie ticket

$15.04

$11.33

11%

15. Which city is more expensive to live in? San Francisco

16. At the top of the page, you see two sentences that describe the “Equivalent income in the city you are moving to” and the “percentage decrease you can take in your salary to still maintain your standard of living”. What do these two sentences mean? Your still making the same income and with the percentage decrease you'll have plenty of salary to maintain standard living.

17. If Marcel was still making $35,000 in Portland, would he be able to afford a higher standard of living? Or would he need to lower his standard of living? How do you know? He would need to lower his standard of living because he wont have money to go higher and then once he tries he will be in debt and wont have enough to live any sort of style.

18. What kind of place would you prefer to live in if you had to choose: a state with zero/low state income tax or an area with a low cost of living? Why? An area with a low cost of living because trying to get everyday essential needs like a house, food, clothes, transportation plays a big part in peoples everyday lives and having affordable cost of living is better than low state tax.

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Last updated: 12/30/20...