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The five types of taxes

So the five types of taxes we'll be talking about
1. Include income
2. Payroll 
3. Property
4. Sales and
5. Excise. 

So we're gonna be breaking down each one of those taxes more thoroughly. Our first one is income tax and we're going to go through each one. So income tax is both at the federal or national level and state levels for our states . So income tax is a tax on earned and unearned income earned income would be like if you earn money from working. So for example your wages your salary if you get paid hourly that be income earned income. whereas unearned income is anytime you receive money from sources other than employment. That would be like interest from a savings account would be considered unearned income. So in earned income as anything you do from working on earned income it's money that you receive from any other source besides working federal income tax specifically is determined by your earned and unearned income and the way it works is the more income you make the higher the tax percentage is. We'll be talking a lot about income tax in the next few of post. So just sit tight with that thought right now just remember income tax. The higher the income the more tax you will be paying.

 It's paid by the majority of people live in the United States that have earned or unearned income. It helps fund the operations of our federal government various government programs including education defense of the nation and disaster relief.

So there's obviously a lot more that helps fund. Mean it's a big source of contention in our nation right now as to what should be funded and how much should be funded.But regardless income tax helps fund those programs.

State income taxes same earned by or paid by earned and unearned income you make. Again the higher the income the more tax you pay. And it's only paid by those that are living in the states that have income tax not all states have state income tax. So it helps one fund different things. For example it could fund state highways operations of the state government. 

Our second type of tax we're going to talk about is payroll tax payroll tax is a tax on earned income that supports just two programs Social Security and Medicare on your pay stub.

This might be known as FICA so the tax is determined by a set percentage of your earned income. So it's a set percentage it doesn't change based on how much you make and it's deducted out of your paycheck except for those who are self-employed.

Except for self-employed. Then you had to take it out of your own. Whatever you earn you have to take it out of your your earnings but otherwise your employer should take it out of your paycheck. So it's paid by individuals who earn income from working. Also though your employers have to pay payroll tax on your salary so there's two different sources of payroll tax from your paycheck and your employer And again it just funds two programs Social Security and Medicare. 

Social Security's purpose. You've heard of it. It's another hot topic in the government right now.

The purpose is to provide income primarily for retirees or people with profound disability children who have lost a parent or a person with children who has experienced the death of a spouse. So it's to provide money. Monthly amounts of money again. Retirees are kind of the biggest section here but also people who have a serious disability. Anybody who's lost a parent or a person with children who has experienced the death of a spouse and to help provide income for those people.

The amount I've mentioned on the left side is a set percentage no matter how much you make. And that set percentage is six point two percent of your income.

There is an annual maximum so for 2016 that annual maximum was one hundred eighteen thousand five hundred dollars.

It was one hundred twenty seven thousand two hundred dollars and twenty eighteen which will be for this year. So starting moving forward it's a hundred twenty eight thousand seven hundred. So not that you need to know those numbers but just realize that there is an annual maximum. That your money will be taxed for Social Security. So again at six point two if your income up to Daniel Maxim and once you've hit that number you don't have to be taxed for Social Security with any dollar amount that you make after you've hit that maximum.

Now Medicare is different. It helps pay for health care for senior citizens. There is also something called Medicaid which is different. This is Medicare and it helps pay for health care for senior citizens. It is part of your payroll tax. And again this is a specific percentage it's one point forty five percent of your earned income. There is no limit. So there's no maximum as to how much you pay for your Medicare taxes.