Important Taxes

What are taxes? Taxes are involuntary costs applied to transactions and money you earn. Taxation since its introduction to the American Colonies has evolved into the system we know today. There are many different taxes in the present economic environment today. This includes personal income tax, corporate income tax, payroll tax, capital gain tax, sales tax, property tax, inheritance tax, and many more taxes. However, from a student financial perspective only a few of these taxes are truly important to understand. These taxes are income tax and sales tax.

First off, income taxes are applied to individuals and businesses. Let’s focus on individuals. It is important to note that in the state of California some students are exempt for taxes. However, this is strongly determined by how much income is earned, residency, and certain age requirements. In most cases students of the age 16 and older making upwards of $8,000 will end up paying taxes. When you are hired by a company or business you are compensated for you work in the form of a paycheck or monetary payment. Personal income tax is applied to the salary th

at you are earning. In most cases the income tax comes directly out of your paycheck without any necessary action from you. However, in some instances you may be required to set aside money to pay your taxes depending on how and when you receive your salary. Based on your yearly estimated you are charged a specific tax rate. In the case of those living in the United States we have a progressive tax system. In other words, as your salary raises as does the taxes you pay on that money earned. Although this is not a concern for students, the tax bracket or rate is also determined by your marital status. In short, be prepared to have a portion of the income you earn being taken in the form of income taxes.

Next we have sales tax. Sales tax is a taxation applied when a transaction occurs. In the state of California, the sales tax rate is 7.25%. In some regions or districts additional taxes are added to this sales tax. This is important to understand and consider. If you were looking to purchase the brand-new iPhone 12 Pro with the 512GB option, the standard price would be $1,299. With the California tax rate, the price would rise to $1,402.60, a $103.60 increase. Due to the sales tax rate you would need to save a decent amount of money to purchase it. The topic of strong financial decisions and money management practices is covered in another article.