Taxes · Module 1 of 6
The part that is not yours
Why we pay taxes, what income they’re worked out on, and how to set tax aside yourself when no one does it for you.
Key terms in The part that is not yours
- Federal Insurance Contributions Act (FICA) tax
FICA tax is the U.S. payroll tax that funds Social Security and Medicare. It is withheld from an employee's wages and matched by the employer in most cases. The Social Security portion applies only up to an annual earnings limit, while the Medicare portion has no ceiling, and a further surtax applies at high wage levels.
Source: Internal Revenue Service, Topic no. 751, Social Security and Medicare withholding rates
- Estimated tax
Estimated tax is the system of paying income tax in installments during the year on income that has no tax withheld, such as self-employment earnings, interest, dividends and capital gains. In the United States it can cover income tax and self-employment tax. Employees with outside income can sometimes adjust their withholding instead.
- Adjusted gross income (AGI)
Adjusted gross income is total income from all sources minus certain adjustments listed on Schedule 1 of the U.S. federal return. Those adjustments include items such as deductible retirement contributions and student loan interest. AGI sits on the first page of the return and serves as a starting point for several later calculations and eligibility tests.
Source: Internal Revenue Service, Definition of Adjusted Gross Income
Every term on Lever is in the money glossary.
About this module
The part that is not yours is part of Taxes, one of 15 subjects in Lever. It’s a short run of 5 lessons, about 13 minutes in all, so you can finish it in one sitting.
Every lesson takes one idea at a time. You read it with the math worked out step by step, answer a question that puts it to use, then see why the right answer is right and why the others aren’t.
It’s for anyone who was never taught this, and you don’t need to know anything first. Every lesson is free. Lever works out what you already know, so you can start here or let your path bring you to it.
More in Taxes
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2
What your rate really is
How tax brackets really work, and the difference between the rate on extra income and the rate you actually paid.
5 lessons -
3
What you can subtract
Tax deductions versus tax credits, the standard amount versus itemizing, and keeping proof for your claims.
8 lessons -
4
The paperwork year
Filing your tax return: who needs to, when it’s due, whether to pay for help, and how to fix a mistake.
7 lessons -
5
What was already taken
The tax taken from your paycheck, why it’s never exactly right, and how it gets squared up at the end of the year.
5 lessons -
6
Money that is not wages
How tax works on investment gains, losses and dividends, and how a loss can lower the tax on a gain.
6 lessons
Try this module
It’s part of Taxes. Lever will bring it to you when you’re ready, or you can go straight there.