Chapter Three Terms to Know

What city has the highest total travel tax burden? (Kiplinger's article)

Chicago

What is the difference between the marginal income tax rate and the average tax rate?

Marginal income 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

What is the standard deduction?

a set amount on which no taxes are paid single people receive $6,200 married couples filing jointly receive $12,400 blind people and 65+ receive higher standard deductions

What is income tax withholding?

-a way of paying federal income taxes -pay-as-you-go system that requires an employer to deduct federal income tax from your pay -withheld amount is based on the number of exemptions and the expected deductions claimed

Form 1040

-expanded version of Form 1040A -includes sections for all types of income -required to use this form if your income is over $100,000 or if you can be claimed as a dependent on your parents return and you had interest or dividends over a set limit -allows you to itemize your deductions

Form 1040A

-form used by people who have less than $100,000 in taxable income from wages, salaries, tips, unemployment compensation, interest, or dividends and use the standard deduction -take deductions for individual retirement account contributions and a tax credit for child care and dependent care expenses

Form 1040 EZ

-single or married filing a join return, under age 65, and claim no dependents -income consisted only of wages, salaries, and tips and not more than $1,500 of taxable interest -taxable income is less than $100,000 -do no itemize deductions or claim any adjustments to income or any tax credits

What is Tax Freedom Day?

-usually in mid-April -represents how long the average person works to pay taxes -the time that elapsed from January 1 until mid-April represents the portion of the year people work to pay their taxes

What are the 4 types of taxes?

1. taxes on purchases 2. taxes on property 3. taxes on wealth 4. taxes on earnings

How many states do not have a state Income tax?

7 (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming)

The text lists these companies as the two most popular providers of online tax software.

H&R Block At Home TurboTax