The document is a slide presentation by Russell James on taxes including income tax, capital gains tax, estate tax, gift tax, and generation skipping tax. It provides examples to simply illustrate tax rates and how deductions affect taxable income. For income tax, it shows marginal tax rates and calculates taxes owed at different income levels. For capital gains, it distinguishes long and short-term gains tax rates. Estate and gift taxes are explained along with lifetime gift/estate tax exemptions. Generation skipping tax is described as applying to large gifts to grandchildren. Overall, the presentation aims to introduce several major US tax types in a straightforward manner using examples.

1. Russell James, J.D., Ph.D., CFP®
Professor, Texas Tech University
A Super
Simple
Introduction
to
Taxes
Income, Capital Gain,
Estate, Gift and
Generation Skipping

2. A Super
Simple
Introduction
to Taxes
Part 1: Tax
Brackets

3. We pay taxes
on money we earn.
We call these income
taxes.
We pay taxes when we
sell something for more
than we paid for it.
We call these capital gains
taxes.

4. The federal government
charges these taxes
Most states do too

5. We (sometimes)
pay taxes on
money we leave
to other people
when we die.
We call these
estate taxes.
To prevent tax free
transfer of estates
before death, we
(sometimes) pay
taxes on gifts to
others.
We call
these gift
taxes.

6. The percentage we pay in taxes
is not flat

7. 2017 federal income
tax brackets for a
single person
Marginal
Tax Rate Taxable Income
10% $0 – $9,325
15% $9,326 – $37,950
25% $37,951 – $91,900
28% $91,901 – $191,650
33% $191,651 – $416,700
35% $416,701 – $418,400
39.6% $418,401+

8. How much taxes are
owed on $5,000?
$5,000 x 10% = $500
Tax Rate Taxable Income
10% $0 – $9,325
15% $9,326 – $37,950
25% $37,951 – $91,900
28% $91,901 – $191,650
33% $191,651 – $416,700
35% $416,701 – $418,400
39.6% $418,401+

9. How much taxes are
owed on $10,325?
($9,325 x 10%) +
($1,000 x 15%)
$1,082.50
Tax Rate Taxable Income
10% $0 – $9,325
15% $9,326 – $37,950
25% $37,951 – $91,900
28% $91,901 – $191,650
33% $191,651 – $416,700
35% $416,701 – $418,400
39.6% $418,401+

10. How much taxes are owed
on $40,000?
($9,325 x 10%) +
(($37,950-$9,325) x 15%) +
(($40,000-$37,950) x 25%)
$5,738.75
Tax Rate Taxable Income
10% $0 – $9,325
15% $9,326 – $37,950
25% $37,951 – $91,900
28% $91,901 – $191,650
33% $191,651 – $416,700
35% $416,701 – $418,400
39.6% $418,401+

11. A Super
Simple
Introduction
to Taxes
Part 1: Tax
Brackets

12. A Super
Simple
Introduction
to Taxes
Part 2: Tax
Deductions

13. A tax
deduction
reduces
taxable
income

14. If I have $10,000 of taxable income
then get a $1,000 deduction
How much taxable
income do I have?
$10,000 - $1,000 = $9,000

15. If I have $100,000 of taxable income
then get a $1,000 deduction
How much taxable
income do I have?
$100,000 - $1,000 = $99,000

16. How much is a deduction worth?
The amount of the deduction
X The marginal tax rate
Deduction value

17. Taxpayers can take either itemized
deductions or the standard deduction
Standard
Deduction
(2017)
$6,350 single
Actual
itemized
deductions

18. If all itemized
deductions
combined are less
than the standard
deduction, they are
worth nothing

19. For the following examples,
we will keep it simple by
assuming the taxpayer is
already itemizing deductions
(i.e., they have other
deductions exceeding the
standard deduction amount)

20. High income earners can’t
use the full deduction
until after they have
passed a minimum
amount of deductions.
2017
[income-$313,800]*3% married or
[income-$261,500]*3% single
For our examples, we will
assume other deductions
have already absorbed
this reduction or that
donor income is below the
threshold.

21. How much is a $1,000
deduction worth to a
person with $8,000 of
taxable income?
$1,000 x 10% = $100
Tax Rate Taxable Income
10% $0 – $9,325
15% $9,326 – $37,950
25% $37,951 – $91,900
28% $91,901 – $191,650
33% $191,651 – $416,700
35% $416,701 – $418,400
39.6% $418,401+

22. How much is a $1,000
deduction worth to a
person with $500,000 of
taxable income?
$1,000 x 39.6% = $396
Tax Rate Taxable Income
10% $0 – $9,325
15% $9,326 – $37,950
25% $37,951 – $91,900
28% $91,901 – $191,650
33% $191,651 – $416,700
35% $416,701 – $418,400
39.6% $418,401+

23. How much is a $1,000
deduction worth to a
person with $10,000 of
taxable income?
($675 x 15%) +
($325 x 10%)
$133.75
Tax Rate Taxable Income
10% $0 – $9,325
15% $9,326 – $37,950
25% $37,951 – $91,900
28% $91,901 – $191,650
33% $191,651 – $416,700
35% $416,701 – $418,400
39.6% $418,401+

24. A Super
Simple
Introduction
to Taxes
Part 2: Tax
Deductions

25. A Super
Simple
Introduction
to Taxes
Part 3: Capital
Gain, Estate, Gift,
and Generation
Skipping Taxes

26. If I sell something for more than I paid for
it, that profit is taxed as a capital gain
What I sold it for –
What I paid for it
Capital gain

27. What I sold it for – Basis = Capital gain
Instead of
“What I paid for it”,
we use the term
Basis

28. What I sold it for – Basis = Capital gain
Basis is
+ what I paid for it
+ any money I spent improving it
- any depreciation tax
deductions I have already
taken on it

29. If I owned the item for more than one year,
it is a long-term capital gain
Taxable income
bracket
Long-term
capital gain + ACA
10% or 15% 0%
25%, 28%, 33%, or 35% 15%
25%, 28%, 33%, or 35% &
modified AGI $200,000+ (single)
or $250,000+ (married)
18.8%
(15% + 3.8%)
39.6% +
modified AGI $200,000+ (single)
or $250,000+ (married)
23.8%
(20% + 3.8%)

30. We (sometimes)
pay taxes on
money we leave
to other people
when we die.
We call these
estate taxes.
To prevent tax free
transfer of estates
before death, we
(sometimes) pay
taxes on gifts to
others.
We call
these gift
taxes.

31. There are no estate or
gift taxes on up to
$5,490,000 (in 2017)
of transfers.
The top rate is 40%.

32. Transfers to
grandchildren
with living
parents, in excess
of $5,490,000 (in
2017) total, may
create generation
skipping transfer
taxes. This adds
another 40% tax.

33. If I earn an extra $100,000 to
leave as an inheritance to my
grandchildren, how much of it
will they get (if I live in California
at all top marginal rates)?
Cali. Income Tax
($100,000 x 13.3%) => $86,700
Fed. Income Tax
($86,700 x 39.6%) => $52,367
Estate tax
($52,367 x 40%) => $20,947
GST tax
($31,420 x 40%) => $12,568
$18,852

34. A Super
Simple
Introduction
to Taxes
Part 3: Capital
Gain, Estate, Gift,
and Generation
Skipping Taxes

35. Help me
HERE
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36. All slides are
taken from the
book Visual
Planned Giving.
Available from Amazon.com

37. Russell James, J.D., Ph.D., CFP®
Professor, Texas Tech University
A Super
Simple
Introduction
to
Taxes
Income, Capital Gain,
Estate, Gift and
Generation Skipping