Types of Taxes
Federal Taxes
- Income Tax
- Capital Gains Tax
- Payroll Tax
- Corporate Tax
- Excise Tax
- Tariffs
- Estate Tax & Gift Tax
Texas Taxes
- Sales Tax
- Property Tax
- Franchise Tax
- Motor Vehicle Tax
- Severance Tax
- Hotel Occupancy Tax
Federal Tax Sources
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Federal Tax Sources
Texas Tax Sources
Does not include the more than 25% of Texas state revenue that comes from the federal government
Capital Gains Tax: Gains and Losses from Investments
- Includes startup businesses, stocks, bonds, real estate including private residences, and collectibles
- Short-term capital gains: 1 year or less
- Long-term capital gains: 1 year or more
- Taxed at a lower rate than ordinary income
- Taxable events are triggered by the sale of the asset because…
Capital Gains Tax: Gains and Losses from Investments
What goes up can come down, so the gain is just paper until it is converted to dollars by a sale
Payroll Taxes
Paid by employers and employees from wage withholding
Security (OASDI) - 6.2% from employer and 6.2% from employee on first $176,000/year
- Medicare - 1.45% from employer and 1.45% from employee
- Total 7.65% from employer and 7.65% from employee
Unemployment Insurance (UI)
- paid by employer only
- Federal Unemployment Tax Act (FUTA) - 6.0% on first $7,000 of wages
- Texas State Unemployment Tax Act (SUTA) - 0.25% to 6.25% on first $9,000 of wages by employer experience rating
Corporate Tax
Tax on profits of corporations
People will often ask, “Why does Company X have $10 billion in sales and not pay any federal income tax?”
Not taxes on sales or revenues because…
Corporate Tax
If expenses are higher than sales, there is no profit or income, there is a loss!
- Losses “carry forward” to future years counting against future income
Excise Taxes, Tariffs
Excise Taxes
- taxes on specific goods and services
- gasoline, alcohol, tobacco, airline tickets, etc.
- paid by the consumer but collected by the seller
- paid by the seller to the government
Tariffs
- taxes on imported goods
- paid by the importer but passed on to the consumer at least partially
Estate and Gift Taxes
Estate Taxes
- Combined Estate and Gift Tax lifetime exemption of $13.99 million (2025) (will be cut 50% when 2017 tax cust expire)
- taxes on the value of an estate at death
- paid by the estate before distribution to heirs
- not paid on gifts to spouses or charities
Gift Taxes
- taxes on gifts over $17,000 per year
- paid by the giver of the gift
- not paid by the recipient of the gift
- not paid on gifts to spouses or charities
Bonds
Federal Bonds
- Taxable
- Issued to cover the national debt
- Total debt level must be approved by Congress
State Bonds and Municipal Bonds (Munis)
- Nontaxable at the federal level with a few exceptions
- Cover state, local and county expenses
- In most states, require voter approval
Taxpayer’s Perspective
Things Boomers complain about on social media
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What are taxes and how do I pay them
Taxpayer’s Persepective
Everyone in this class could figure this out today with the link to the IRS website using long hand math on paper, if you had to!
Taxpayer’s Perspective
- Withholding
- W4, W2, 1040, 1099
- Gross Income, Adjusted Gross Income, Taxable Income
- Tax Brackets
- Tax Credits vs. Tax Deductions
- Standard Deduction vs. Itemized Deductions
- Paying your taxes: Tax software & Tax professionals
Paying Your Taxes: Process
Withholding
- W4 sets withholding amount from paycheck
Filing the return
- W2 shows information withholding
- 1099 shows income from other sources
- 1040 series are tax return forms
- Gross Income: Total received
- Adjusted Gross Income: Gross income minus adjustments
- Taxable Income: AGI minus deductions
Credits and Deductions
Credits
- dollar for dollar reduction in tax liability
- May be a percentage
- refundable or nonrefundable
- Child Tax Credit, Earned Income Tax Credit, American Opportunity Tax Credit, Lifetime Learning Credit
Deductions
- commonly called "write-offs"
- reduces taxable income
- reduces tax liability by the tax rate x deduction (less than 100%)
Deduction Example
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Income Tax Rates
Deduction Example
- Tax Rate: 22%
- Deduction Amount: $10,000
- Tax Liability Reduction: $10,000 x 22% = $2,200
- Tax Paid after deduction: $10,000 - $2,200 = $7,800
You can’t make money from “write-offs”
It is mathematically impossible to make money from a deduction or a credit of less than 100%
Standard vs. Itemized Deductions
You have to pick one or the other. No, you can’t have both.
Standard vs. Itemized Deductions
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Standard Deductions - You get this for breathing
Source: Money Guy
Standard vs. Itemized Deductions
Itemized deductions
- Add up the deductions
- Must be allowable deductions
- Examples: mortgage interest, medical expenses over 7.5% of AGI, state and local taxes, charitable contributions, unreimbursed business expenses
- Must be more than the standard deduction to be worth it
- Auditable
Paying Your Taxes: Payment
Filing the 1040: IRS Help
Filing the 1040: Software
IRS Free File
Most Free File providers will offer a paid version if you don’t qualify for Free File
Paid Software available on:
- Amazon.com
- Walmart.com
- TurboTax.com
- H&R Block
- TaxActOnline.com
Software available in stores
- Walmart
- Staples
- Office Depot
- Many others
Paying Your Taxes: Tax Professionals
Franchise and locally owned Tax Preparers
- Example: H&R Block, Jackson Hewitt, Liberty Tax
- No formal training, education required
- May offer other services including audit protection and refund anticipation loans
Enrolled Agents
- IRS’s Special Enrollment Examination (SEE)
- 3 sections for individual, business, and representation
- Can represent clients during an audit
Certified Public Accountants (CPAs)
- Licensed by the state
- Must pass a rigorous exam
- Must complete continuing education requirements
- Can represent you before the IRS
- Can provide tax planning and advice
- Some may even be graduates of the Bauer School of Business
Federal Budget Process
- Fiscal year
- Budget Process
- Budget Deficit and National Debt
Fiscal Year
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Fiscal vs Calendar Year
Authorship and License
Cover image created with Imagen 3.0, part of Google’s Gemini.
Do not submit to Quizlet, Chegg, Coursehero, or other similar commercial websites.
![Creative Commons License]()
Source: Texas Comptroller
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Source: House Budget Committee
