Taxes 101 — slides
Financial Literacy Club
Money After High School · Lesson 2
Taxes 101
Income, payroll, and sales taxes — and how filing a return works.
16-minute lesson · learnwithflc.org
Taxes 101 · 1 / 19
Financial Literacy Club
Money After High School · Lesson 2
Taxes 101
Income, payroll, and sales taxes — and how filing a return works.
16-minute lesson · learnwithflc.org
Today's goals
By the end of class, you'll be able to…
- Explain marginal and effective tax rates
- Show why a raise never lowers take-home pay because of brackets
- Describe how filing a tax return works
Warm-up
True or false: a raise can push you into a higher tax bracket and make you take home less money.
Think, then write your answer.
The big idea
Taxes 101
Income, payroll, and sales taxes — and how filing a return works.
Money After High School · Lesson 2
- Income tax: on money you earn. Federal, and in many states, state income tax too.
- Payroll taxes: Social Security and Medicare, taken from each paycheck.
- Sales tax: added at the register. In Texas, the state rate is 6.25%, and local areas can add up to 2% more, for up to 8.25% total.
- Property tax: on homes and land — renters usually pay it indirectly through rent.
Money After High School · Lesson 2
Federal income tax is progressive: income is taxed in layers called brackets, and each layer has its own rate. Your marginal rate is the rate on your last dollar; your effective rate is your total tax divided by your income.
Money After High School · Lesson 2
Myth: "A raise could make me take home less"
Moving into a higher bracket only raises the tax on the dollars in that higher bracket. Your earlier dollars are taxed the same as before. A raise still means more take-home pay.
Money After High School · Lesson 2
Each year, your employer sends a W-2 showing what you earned and what was withheld. You use it to file a tax return (Form 1040), usually due around April 15. If too much was withheld, you get a refund; if too little, you owe the difference.
Money After High School · Lesson 2
File even if you don't have to
If you earned too little to be required to file, you may still get back federal income tax that was withheld — but only if you file. Free help: the IRS Free File program and Volunteer Income Tax Assistance (VITA) sites. Rules and amounts change yearly; check irs.gov.
See it
Using simplified brackets of 10% on the first $10,000, 12% on income up to $40,000, and 22% above that, $45,000 of taxable income owes $5,700 in total — an effective rate of 12.7%, even though the top marginal rate is 22%. These are not the real IRS brackets.
- 10% on $0–$10,000
- $1,000
- 12% on $10,000–$40,000
- $3,600
- 22% on $40,000–$45,000
- $1,100
- Total tax on $45,000effective rate 12.7%
- $5,700
Real example
Aisha's first tax return
Aisha worked part-time last year, and federal income tax was withheld from every paycheck. Her income was low enough that she wasn't required to file.
- Her W-2 shows the federal income tax withheld all year.
- She files anyway, for free, with help at a VITA site.
- Because she owed little or no income tax, most of what was withheld comes back as a refund.
Had she skipped filing, that money would have stayed with the IRS. Filing takes an afternoon; the refund is hers.
Activity · pairs · 12 min
Bracket Buckets
- Use made-up brackets (not real IRS rates): 10% on the first $10,000; 15% on income from $10,000 to $40,000; 25% on income above $40,000.
- Pairs fill “buckets” to find the tax on $30,000 and on $45,000.
- Pairs calculate each person's effective rate (total tax ÷ income) and marginal rate.
- Discuss: did the $45,000 earner lose money by earning more?
Check for understanding · 1 of 3
Getting a raise that moves you into a higher tax bracket can make your total take-home pay go down.
- True
- False
False
Only the dollars in the higher bracket are taxed at the higher rate. More income still means more take-home pay.
Check for understanding · 2 of 3
You buy a $50 jacket in a Texas city with the maximum combined sales tax of 8.25%.
About how much do you pay in total?
- A$50.00
- B$58.25
- C$54.13
- D$53.13
C. $54.13
8.25% of $50 is about $4.13. $50 + $4.13 ≈ $54.13.
Check for understanding · 3 of 3
Your employer withheld more federal income tax this year than you actually owe.
What happens when you file?
- AYou get the difference back as a refund.
- BThe extra is lost.
- CIt's applied to your student loans automatically.
- DYou owe a penalty.
A. You get the difference back as a refund.
A refund is your own money coming back because too much was withheld during the year.
Remember
Key takeaways
- Marginal rate = rate on your last dollar. Effective rate = total tax ÷ income.
- A raise never lowers take-home pay because of brackets.
- W-2 → tax return (Form 1040), usually due around April 15.
- Filing can get withheld money back.
- Rules change yearly — check irs.gov.
Discuss
Talk it over
- Why do you think the tax brackets myth is so common?
- Should everyone be taught to file their own taxes in high school?
Exit ticket
Why might a teen with a part-time job want to file a tax return even if they don't owe tax?
Answer on your exit ticket before you leave.
Nice work today.
Review this lesson anytime — free, no account needed:
learnwithflc.org/courses/money-after-high-school/taxes
Next up: finish your worksheet.