Money Fitness

• Taxes are involuntary fees paid by individuals and/or businesses and are enforced by a government entity (IRS).
• A percentage of the taxpayers earning
• Examples of what taxes pay for or subsidize:
  • Public transportation
  • Roads
  • Public Libraries
  • Government Activities
  • Community Development
  • Food Stamps and Welfare Benefits
  • National Defense and Law Enforcement

• Income Tax: a percentage of individual earnings filed to the federal government
• Corporate Tax: a percentage of corporate profits taken as tax by the government to fund federal programs
• Sales Tax: taxes levied on certain goods and services
• Property Tax: based on the value of land and property assets
• Estate Tax: rate applied to the fair market value of property in a person’s estate at the time of death 

What Are Tax Credits?

Education tax credits are awarded to students to help with the cost of their education. These credits can reduce the overall amount of taxes you pay and includes qualifying education expenses. 

American Opportunity Tax Credit

This credit lets you claim all of the first $2,000 you spent on tuition, books, equipment, and school fees (not rent or any other living expenses). You can still receive 40% of the American opportunity tax credit’s value — up to $1,000 — even if you earned no income last year or owe no tax. 

Filing your taxes is the process you go through every spring to make sure you have paid the government the correct amount in income taxes each year. If you have paid too little in income taxes, you will have to pay more to the IRS. However, if you have overpaid, they will owe you money. 

Some paid service options for filing your taxes is to use a filing service such as your local tax accountants, or a larger online service such as TurboTax or H&R Block. However, you can also file your taxes for free through the government's Free File service by the IRS. It is important that you also hold onto any tax documents that you receive so that you have the information you need to file. These tax forms can include W2 forms you get from your employer, in addition to a wide array of forms you might receive if you used a scholarship or grant to pay for school. 

In addition to paying income tax to the federal government, some states require that you pay income tax to them as well. Washington state does not have an income tax.