Believe it or not, this is my number 1 question from college students. It was a little outside of my expertise, but I decided to add a lesson on the subject to my classes due to significant demand.

What exactly do I need to know about taxes? Well, for starters, everyone hates them, but on the flip-side – it has been said that taxes are the price we pay to live in a civilized society.

When all is said and done, the average American pays 29% of their income each year on taxes. Luckily, almost all of it is taken out when you get money, or are making a purchase. If you own a home, property taxes have to be saved up for, but the rest is kind of built in to your spending.

Below are the basic types of taxes:

Income taxes

Payroll (salary income)
Capital Gains (investment income)

Inheritance/gift taxes

Property / Real Estate tax (homeowner pays, renter has it built into their rent)

Taxes on goods and services

Sales tax (why the price of an item is always greater than the sticker price)
User fees (hotel/airline/toll road)
Excise taxes (gas – charged based on quantity, not price)
Sin tax (alcohol/gambling/tobacco)
Luxury Tax (expensive cars or jewelry)