Chapter 3 - Taxes in your financial plan

¡Supera tus tareas y exámenes ahora con Quizwiz!

How to calculate taxable income.

1.) Determine Gross income 2.) Gross Income - adjustments = AGI 3.) AGI - standard deduction (or itemized deductions) = taxable income.

What are the 4 major types of taxes?

1.) Taxes on purchases 2.) Taxes on property 3.) Taxes on wealth 4.) Taxes on earnings

Biggest difference between traditional and Roth IRA

Roth IRA contribution is not tax deductibe, but after 5 years, its earnings are tax free

What is special about medical and dental expenses with regards to them being itemized deductions.

The amount of this deduction is the medical and dental expenses that exceed 10% of the AGI.

tax shelter

an investment that provides immediate tax benefits and a reasonable expectation of a future financial return

How does one avoid an IRS audit?

avoid filing mistakes

401 plan are tax-____.

deffered

itemized deductions

expenses that can be deducted from adjusted gross income: medical expenses, real estate property tax, home mortgage ineterest, charity, etc

AGI

gross income reduced by certain adjustments, such as contributions to an IRA or alimony payments

passive income

income resulting form business activities which you do not actively operate

tax-exempt income

income that is not subject to tax

tax deffered income

income that will be taxed at a later date

earned income

money received for personal effort, such as wages & salary

investment income

money recieved in form of dividents, interest, etc.

taxable income

net amount of income, after allowable deductions, on which income tax is computed

capital gains tax

profits from the sale ofa capital asset such as stocks, bonds, real estate

Keogh plans are for whom?

self employed people and own their own business

Tax credit vs tax deduction?

tax credit directly reduces your taxes by x amount tax deduction reduces your taxable income; actual taxes reduction depends on tax bracket

excise tax

tax imposed on specific goods and services, such as gass, boges, drinks,etc

estate tax

tax imposed on the value of a person's property at the time of death

marginal tax rate

the rate used to calculate tax on the last and next dollar of taxable income

average tax rate

the total tax due divided by taxable income

tax evasion

the use of illegal actions to reduce one's taxes

tax avoidance

the use of legitimate methods to reduce one's tax

exclusion

an amount not included in gross income

tax credit

an amount subtracted directly from the amount of taxes owed

tax deduction

an amount subtracted from adjusted gross income to arrive at taxable income

exemption

a deduction from AGI by yourself, spouse, or qualified dependents

tax audit

a detailed examination of your tax return by the IRS

standard deduction

a set amount on which no taxes are paid

inheritance tax

a tax levied on the value of property bequeathed by a deceased person


Conjuntos de estudio relacionados

Anatomy Chapter 2.1, 2.2, 2.3 (Atoms, Ions, Molecules)

View Set

Forest Protection, Conservation, and Development

View Set

Test.1.1.Domestic versus International Logistics

View Set

Microsoft PowerPoint Final notes

View Set

Lesson Quiz 7-2 World War I and Its Aftermath

View Set