Chapter 12: Planning Your Tax Strategy. Section 12.1 Income Tax Fundamentals. Today’s Agenda: The importance of tax planning How to identify your taxable income The difference between deductions and credits The W-4 form Goal: Learn basic income tax terminology. “Tax Freedom Day”
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Chapter 12: Planning Your Tax Strategy
Section 12.1 Income Tax Fundamentals
Taxes are an everyday occurrence!
What do taxes pay for?
Pay your FAIR SHARE and NO MORE!
TAXABLE INCOME is based on your income, plus many other factors.
You start with your income, and work it DOWN, DOWN, DOWN to find your TAXABLE INCOME.
1. Add up Gross Income
(Some types of income are not taxed)
2. Adjustments to Income
Gross Income – Adjustments =
Adjusted Gross Income
3. Tax Deductions
Standard vs. Itemized Tax Deductions
5. Calculating Your Tax Liability:
AGI – Deductions – Exemptions =
6. Tax Credits
6. Your Total Tax Liability
What is a Dependent?