AAEC 2104 Lecture Notes - Lecture 5: Standard Deduction, Alternative Minimum Tax, Traditional Ira

• School: Virginia Tech
• Department: Agricultural and Applied Economics
• Course: AAEC 2104
• Professor: White

Document Summary

Chapter 4 (federal income taxes: why do we pay them? a. i. Help fund national, state, local efforts a. i. 1. a. i. 2. a. i. 3. a. i. 4. a. i. 5. Welfare, farm programs, special interest, etc: your goal should be to maximize your after-tax income. Marginal vs average tax rates: us uses a progressive tax system a. i. Your tax rate (%) increases as your income increases a. ii. High income households pay a higher percentage: everyone starts out paying the same rate b. i. Bill gates pays the same rate as you on the first portion of his income: marginal tax rate = the taxes owed on the next dollar you earn, average tax rate = total taxes / taxable income. Fica (social security & medicare) -- 7. 65: filling out a w-4 form b. i. The more exemptions you list, the less income tax they withhold b. ii. Fill out when you start a job b. iii.