Taxes 101: What Every High Schooler Should Know

Taxes 101: What Every High Schooler Should Know

Taxes might seem like a problem for just adults, but if you’ve ever earned some money, bought something, or plan on working in the future taxes matter to you. Understanding the basics of taxes now can save you confusion (and maybe some money) later in life. 

What Are Taxes?

Taxes are mandatory payments that citizens must make to the government to fund things like public services. These services include public schools, roads, emergency responders, and the military. Without taxes, many things that we take for granted wouldn’t exist.

Types of Taxes you Might Encounter

1. Income Tax: If you have a job, you already are paying this tax. Employers will deduct a portion of your paycheck from you to send to the government. Even part-time jobs or summer jobs can involve income tax.

2. Sales Tax: Everytime that you buy something, you usually pay extra due to sales tax. This type of tax is added onto the cost of most goods and services that people purchase.

3. Payroll Tax: If you check your pay stub, you might see deductions for Social Security and Medicare. These are payroll taxes that help fund retirement programs for older adults and healthcare.

Why Should You Care?

Knowing about taxes can help you make smarter money decisions. For example:

• Filing Taxes: If you earn above a certain amount (around $13,000,) you are legally required to file a tax return. Even if you earn less, filing could get you a refund on taxes that were withheld from your paycheck.

• Budgeting: Understanding that taxes reduce your take home pay helps you budget better. If you expect to earn $500 but only bring home $450 after taxes it impacts your spending plans.

How to Prepare Now

1. Save Your Pay Stubs: These show how much you earn and how much tax is withheld from you. They’re important for filing a tax return.

2. Learn Basic Forms: The W-4 form determines how much tax that your employer withholds. When you start a job, you’ll fill one out.

3. Use Free Resources: The IRS offers free tools to help you learn and even file your taxes if your income is low.

The Bottom Line

Whisk taxes may not be the most exciting topic, understanding them now will make your financial future much easier. Whether you’re getting your first job or just want to know where your money goes, a little knowledge about taxes can go a long way.