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