Question of the Day: If a single person taking the standard deduction makes $40,000, how much will they pay in federal income taxes?
How much of a cut does Uncle Sam get if you made $40,000 this tax year?
Answer: $2,918
Total taxable income: $40,000 - $13,850 (standard deduction) = $26,150
10% of the first $11,000 = $1,100
12% of the remaining $15,150 = $1,818
$1,100 + $1,818 = $2,918
Questions:
- What was your reaction to the amount of federal income tax a person would pay for earning $40,000?
- Besides federal income taxes, what are some other things a person making $40,000 would have to account for before determining their net pay?
- Compare the tax situation of someone making $40,000 to someone making $80,000. How does the tax system address different income levels?
Here are the ready-to-go slides for this Question of the Day that you can use in your classroom.
Behind the numbers (Nerd Wallet):
"The United States has a progressive tax system, meaning people with higher taxable incomes pay higher federal income tax rates.
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Being "in" a tax bracket doesn't mean you pay that federal income tax rate on everything you make. The progressive tax system means that people with higher taxable incomes are subject to higher federal income tax rates, and people with lower taxable incomes are subject to lower federal income tax rates.
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The government decides how much tax you owe by dividing your taxable income into chunks — also known as tax brackets — and each chunk gets taxed at the corresponding tax rate. The beauty of this is that no matter which bracket you’re in, you won’t pay that tax rate on your entire income.
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The percentage of your taxable income that you pay in taxes is called your effective tax rate. To determine effective tax rate, divide your total tax owed (line 16) on Form 1040 by your total taxable income (line 15).
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Income thresholds for tax brackets are updated annually. Several provisions in the tax code, including the income thresholds that inform the federal tax brackets, are adjusted annually to reflect the rate of inflation. This indexing aims to prevent taxpayers from experiencing "bracket creep," or the process of being pushed into a higher tax bracket because of inflation.
Example #1: Let’s say you’re a single filer with $32,000 in taxable income. That puts you in the 12% tax bracket in 2022. But do you pay 12% on all $32,000? No. Actually, you pay only 10% on the first $10,275; you pay 12% on the rest. (Look at the tax brackets above to see the breakout.)"
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Show your students how the government spends the taxes it collects in MOVE: Your Tax Dollar In Action.
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About the Author
Mason Butts
After graduating from UCLA with a Master's in Education, Mason spent 5 years as a science educator in a South Los Angeles public high school. He is committed to supporting the holistic growth of all students and empowering them to live a life of relational, academic, and financial success. Now settled in the Bay Area, Mason enjoys facilitating professional developments and partnering with educators as they prepare students for a bright financial future. When Mason is not building curriculum or planning a training, he can be found cycling, trying new foods, and exploring the outdoors.
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