Unit F: Personal Financial Literacy

Topic 14: Economic Thinking

14-1: Income Tax

Key Concept

An earnings statement shows how your earned wages are divided among several income taxes and the amount of your paycheck.

Earning Statement: Gross pay = earned wages, Payroll deductions = taxes, Net pay = paycheck amount.

Earned Wages Earned wages are the income you receive from an employer for doing a job. Earned wages are also called gross pay.

Taxes Your employer can deduct your income taxes from your wages before you receive your paycheck. The amounts deducted are called payroll deductions.

The United States government collects federal income tax to fund the business of government.

The Federal Insurance Contributions Act (FICA) requires all employers and employees to pay social security tax and Medicare tax. Employer and employee each contribute a percent of the employee's earned wages. These taxes provide income and medical insurance for some people, such as the elderly or disabled.

Paycheck Amount The amount of your paycheck, called your net pay, is your earned wages minus your payroll deductions.

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Table of Contents

Digits, Grade 7, Volume 2, Homework Helper Unit E: Measurement and Data Unit F: Personal Financial Literacy Unit G: Step-Up Lessons English/Spanish Glossary Formulas Math Symbols Formulas Measures Properties