Personal Finance / Unit 7: Taxes
7.2 Types of Taxes
Notes
Different taxes tax different things.
- Income tax: a percent of what you earn, collected by the federal government and many states.
- Payroll taxes (FICA): fund Social Security and Medicare; taken from paychecks.
- Sales tax: a percent added to purchases at the store. Example: 6% on a $50 item is $3, so you pay $53.
- Property tax: a yearly tax on land and buildings, often funding local schools. Example: 1% of a $200,000 home is $2,000.
- Excise tax: on specific goods like fuel.
Practice
Which tax is added at the register when you buy a shirt?
Sales tax is added to purchases.
A game costs $40 and the sales tax rate is 5%. What is the total price?
Tax is $40 \times 0.05 = 2$. Total is $40 + 2 = 42$.
Which tax is taken from paychecks to fund Social Security and Medicare?
FICA is the payroll tax for those programs.
Ready for more? Take the Unit 7 test.