Personal Finance Chapter 4

Which of the following would be included in gross income?

salaries, wages, commissions, dividends, interest, and profits from business

For calculating your total tax due, your taxable income is to be used in conjunction with either tax tables or tax rate -----

schedules or schedule

When calculating total tax due, ______ are subtracted.

tax credits

The two main types of federal taxes on wages and salary are ______ tax and Social Security tax.

income

Tax planning involves knowing the current laws, maintaining good records, and making purchase and ______ decisions that minimize income taxes.

investment

You calculate taxable income by reducing gross income by adjustments, exemptions, and standard or ------- deductions.

itemized

Real estate property taxers are a major source of revenue for ______.

local governments

An example of tax-exempt income is the interest from ______ bonds issued by cities or states, while an example of tax-deferred income is an IRA.

municipal

On average, the portion of a person's earnings that goes to taxes is ______.

one third

Components of income include earned, investment, and ----- income.

passive

Investment income in the form of dividends, interest, and rent from investments is also called (found in discussion of types of income) ______.

portfolio income

Real estate ______ taxes are based on the value of land and buildings.

property

True or false: Adjusted gross income is gross income reduced for such things as IRA contributions and alimony payments.

True

A tax imposed on the value of a person's property upon that person's death is called a(n):

Estate Tax

Taxable income is calculated as salaries minus adjustments, such as IRA contributions, Keogh retirement plan contributions, and alimony.

False

The two main taxes on salary are income taxes and estate taxes.

False

True or false: Income includes only those earnings that you are actively involved in earning, such as salaries and income from managing a business.

False

True or false: Passive income results from business activities in which you participate regularly.

False

______ tax is calculated on the value of property bequeathed by a deceased person to heirs. This is found in the discussion of taxes on wealth.

Inheritance

True or false: Income tax is calculated on income less deductions and exemptions.

True

An inheritance tax is paid for the right to acquire the inherited property.

True

If you are an employee, your employer should withhold a certain amount for taxes from your paycheck, while self-employed individuals should make estimated tax payments.

True

Income tax is paid during the year through withholding from paychecks and/or estimated payments.

True

Target your tax planning efforts toward paying your fair share of taxes while taking advantage of tax benefits appropriate to your personal and financial situation.

True

A tax ______ is an amount subtracted from adjusted gross income to arrive at taxable income.

deduction

Which of the following are types of investment income?

dividends rent interest

Salary is an example of ______ income.

earned

The goals of tax planning include:

understanding how tax laws impact you. making purchases and investments that reduce tax liability. maintaining complete and appropriate tax records.

Estate taxes are calculated on the ______ of a person's property upon death.

value

Which of the following items are included in gross income?

wages commissions salaries interest

Which of the following are examples of earned income?

wages commissions salary