In this lesson students will learn how to file taxes. They will record notes on the difference between tax credit and tax deductions. Finally they will decide if the standard deduction or itemized deductions would be appropriate for them.
2 slide google presentation
1 page google document worksheet
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Everything you need for the following lesson
Explain to the class that today we are going to be having a lesson that has long been called for in schools. Today we are going to learn how to file our taxes. filing taxes for a vast majority of Americans is an extremely easy process. All you need to do is collect your tax forms and use a product such as TurboTax H&R Block or even the IRS’ free equivalent. If your taxes are more complicated than this because you own a small business or something else that would cause you to have a complex tax situation you will need to hire an accountant.
A vast majority of Americans can easily file their taxes using a product such as TurboTax. We are going to start class off by watching a short video made by TurboTax to show you how easy it is to file your taxes. it is important that you collect all your tax documents typically this means a W-2 a 1095 and sometimes that's it. If you own Investments you will typically get a tax statement from your wealth manager such as fidelity or Vanguard. This being said, your most important tax document will be given to you by your employer. Show students the video. By the end of the video they should understand the following:
- If you have the ability to locate all your tax documents it is easy to upload them to a product like turbotax
- In about 30 minutes you will answer questions about yourself and complete your tax return.
- Finally you will pay for the product and can even use money from your tax return to pay.
Project slide titled tax credits and deductions,
Explain to students that there are two ways to save money on taxes. Knowing the difference between these two and what you qualify for could qualify you for thousands of dollars a year in tax savings. The first type of savings is called a tax credit. Think of a tax credit like a coupon because you qualify for a said tax credit you'll receive that large of a discount or money back on your taxes. One of the most popular tax credits is a credit for having a child you get x amount of dollars from the government per child that you have.
Explain to students that tax deductions are also nice, however work is quite different. a tax deduction lowers your taxable income for example if you make $50,000 a year and you qualify for a $5,000 tax deduction then you will be taxed as if you only make $45,000 a year. In this specific example your tax deduction wouldn't save you $5,000 a year on taxes but it might save you close to a thousand assuming you pay about 20% of your income in taxes. This being said a ity of people use what's known as the standard deduction. The reason why most people use the standard deduction is because recently under the Trump Administration it was raised significantly therefore in order to save more tax savings by itemizing your taxes you typically would need to have quite a few tax deductions. What the standard deduction is is a set amount of money that often changes in which you are not taxed. right now it is set at $12,000 that means that the first $12,000 you make for the year does not get taxed. If you make less than $12,000 a year you shouldn't be paying taxes and if you did should file a tax return and you will get that money back.
Ramsey Team Tax Savings:
Show students the video from the Ramsey Show. By the end of the video they should understand the following:
- An above the line deduction is a deduction you can qualify for on top of your standard deduction. This could make your taxable income decrease by more than $12,000 a year. An example of this would be contributions to an HSA or retirement account.
- It's important to get your taxes done early so that you have plenty of time to pay them before the April 15th tax day. sometimes you don't actually get money back from the government you still owe the government money because of mishaps with your withholdings if this happens you want to know as soon as possible so that you have time to get the funds and get it to the government in time if you wait until April to file your taxes you have to rush to repay your still due taxes.
- You want your tax return to be as close to zero as possible because you want to get all of your money when you're supposed to get it. A tax return means that there were mistakes made along the way and you weren't getting the amount of money per paycheck you deserve. When you get a tax return people often spend it on wants rather than working it into their budget and buying things that are appropriate and that they need. by getting your tax return as close to zero as possible you will save yourself from making inappropriate purchases or things that may hurt you financially in the long run.
Finally have students complete the final question independently they should read the article that brings them to the list of credits and deductions offered by the IRS and spend some time reflecting on whether or not their career path or their plans for the future would qualify them for any tax credits or deductions although sometimes it's hard to plan that far ahead it's good to get an idea of what deductions and credits might be available to them.
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- (Retirement)
