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24 Cards in this Set

  • Front
  • Back
excise tax
a tax imposed on specific goods and services, such as gasoline, cigarettes, alcoholic beverages, tires and air travel
estate tax
a tax imposed on the value of a person's property at the time of his or her death
inheritance tax
a tax levied on the value of property bequeathed by a deceased person
taxable income
the net amount of income, after allowable deductions, on which income tax is computed
earned income
money received for personal effort, such as wages, salary, commission, fees, tips or bonuses
investment income
money received in the form of dividends, interest or rent from investments; also called portfolio income
computing taxable income and your tax liability
step 1: determining adjusted gross income
step 2: computing taxable income
step 3: calculating taxes owed
passive income
income resulting from busines activities in which you do not actively participate
an amount not included in gross income
tax-exempt income
income that is not subject to tax
tax-deferred income
income that will be taxed at a later date
adjusted gross income (AGI)
gross income reduced by certain adjustments, such as contributions to an individual retirement account (IRA) and alimony payments
tax shelter
an investment that provides immediate tax benefits and a reasonable expectation of a future financial return
tax deduction
an amount subtracted from adjusted gross income to arrive at taxable income
standard deduction
a set amount on which no taxes are paid
itemized deductions
expenses that can be deducted from adjusted gross income, such as medical expenses, real estate property taxes, home mortgage interest, charitable contributions, casualty losses and certain work-related expenses
a deduction from adjusted gross income for yourself, your spouse and qualified dependents
marginal tax rate
the rate used to calculate tax on the last (and next) dollar of taxable income
average tax rate
total tax due divided by taxable income
tax credit
an amount subtracted directly from the amount of taxes owed
tax audit
a detailed examination of your tax return by the internal revenue service (IRS)
tax avoidance
the use of legitimate methods to reduce one's taxes
tax evasion
the use of illegal actions to reduce one's taxes
capital gains
profits from the sale of a capital asset such as stocks, bonds or real estate