bus 160 exam 3 prep (snyder)

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itemized deduction

expenses that can be deducted from adjusted gross income, such as medical expenses, real estate property taxes, home mortgage interest, charitable donation, casualty losses, work related expenses

A lease is mainly designed to protect the rights of the landlord (T/F)

false

a general sales tax is also referred to as an excise tax

false

an electric bill is commonly considered a fixed living expense (T/F)

false

conventional mortgage usually have a rate that changes as market interest rates change (T/F)

false

cooperative housing involves the purchase of an individual living unit a multiunit complex or building(T/F)

false

enrolled agents are IRS authors who visit people's homes to verity deducitons

false

most mortgage rates are established by government agencies(T/F)

false

most people mail the full amount owed in federal income tax each april

false

saving money for a down payment to buy a house is usually a short term goal (T/F)

false

several financial benefits are associated with renting your place of residence (T/F)

false

tax deduction directly reduces the amount of taxed owed

false

taxable income refers to the amount deducted from a person's pay

false

closing costs

fees & charges paid when a real estate transaction is complete; also called settlement costs

disadvantages of renting

few financial benefits, restricted lifestyle, legal concerns

disadvantages of owning a home

financial uncertainty, limited mobility, high living cost

cooperative housing

form of housing where a building containing a number of housing units is owned by a nonprofit organization whose members rent the units

adjusted gross income (AGI)

gross income reduced by certain adjustments, contributions to the (IRA) & alimony payments

Balloon mortgage

has a very large final payment

what services are available to home buyers from real estate agents?

help assess housing needs, determine the amount a person can afford to spend, have info on available homes & obtaining a mortgage

passive income

income resulting from business activities in which you do not actively participate

tax-exempt income

income that is not subject to tax

tax-deffered income

income that will be taxed at a later date

what factors affect a person's ability to qualify for a mortgage?

income, other debts, amount available for down payment, length of loan, current mortgage rates

condominium

individually owned housing unit in a building w several such units

excise tax

tax imposed on goods & services like gas, cigs, alcoholic drinks, tires, air travel

main sources of money for a down payment

personal savings, pension plan funds, investments, assistance from relatives

points

prepaid interest charged by the lender

financial benefits

a common advantage associated with home ownership

how can the quality of a school system benefit even homeowners who dont have school aged kids?

a high quality school system will stabilize & increase property values

adjustable-rate mortgage

a home loan with an interest rate that can change during the mortgage term due to changes in the market interest rates

guidelines to determine the amount that individuals should spend for a home purchase?

a person should make payments on the purchase of a home that involve 25 to 30 percent of his or her income, could be affected by amount available for a down payment/other house expenses

inheritance tax

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

estate tax

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

Second Mortgage

allows a person to borrow on the paid-up value of a home

exclusion

amount not included in gross income

tax credit

amount subtracted directly from amount of taxed owed

tax deduction

amount subtracted from adjusted gross income to arrive at taxable income

how do changing interest rates affect amount of mortgages a person can afford?

as interest rates decline, home buyers can afford to take on a larger mortgage

how do closing costs affect a person's ability to afford a home purchase?

closing costs can add several thousand $ to price of home, homebuyer must have funds available

mortgage interst

deductible as an itemized deduction

tax audit

detailed examination of tax return by the IRS

deed

document that transfers ownership of property from one party to another

appraisal

estimate of the current value of a property

IRA contributions

example of an adjustment to income

interest from municipal bonds

example of tax-exempt income

title insurance

insurance during mortgage term that protects owner or lender against financial loss resulting form future defects in the title & from other unforeseen property claims not excluded by policy

tax shelter

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

lease

legal document that defines the conditions of a rental agreement

what factors affect the selling price of a house?

location, size, condition, features, current market demand

mortgage

long-term loan on a specific piece of property such as a home or real estate

some opportunity costs associated with the selection of housing

lost interest on a down payment, security deposit & travel time to work when living in the country

buyer's market

lots of homes available with low demand

what actions are recommended when planning to sell your home

make repairs, new paint, clear our areas, remove unnecessary things

Main benefits of renting

mobility, fewer responsibilities, lower initial costs

earned income

money received for personal effort, ex: wages, salary, commission, fees, tips, bonuses

investment income

money received in form of dividends, interest, rent from investments: portfolio income

escrow account

money usually deposited w the lending financial institution for the payment of property taxes & homeowners insurance

35%

most lending institutions believe that a person can afford a monthly payment of about _______ of gross income less any long-term debt

loctation

most real estate professionals believe that the most important factor in selecting a home is

taxable income

net amount of income after allowable deductions which income tax in computed

seller's market

not alot of homes available with high demand

what should you consider when deciding to sell your home on your own or to use a real estate agent?

on your own, you will have to price, advertise & show the house, this saves money, if you want someone else to handle then use a REA

advantages of owning a home

pride of ownership, financial benefits, lifestyle flexibility

capital gains

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

marginal tax rate

rate used to calculate tax on last dollar of taxable income

exemption

reduction from adjusted gross income

amortization

reduction of a loan balance through payments made over a period of time

most negotiable components of a lease

rent, amount of security deposit, start date of lease, decorating

zoning laws

restrictions on how the property in an area can be used

paying points

result in obtaining a lower mortgage rate

standard deduction

set amount which no taxes are paid

applicant's credit rating

the major factor that affects a person's qualifications for a mortgage is

how do DISCOUNT POINTS affect mortgage?

they increase initial cost of mortgage

average tax rate

total tax due divided by taxable income

financial risks are associated with the purchase of a home(T/F)

true

tax evasion

use of illegal actions to reduce one's taxes

tax avoidance

use of legitimate methods to reduce one's taxes

field audit

when an IRA agent visits your home to verify tax records

under what conditions might an adjustable rate mortgage be appropriate

when interest rates are high & they are expected to decline. benefits the borrower as rates decline, or homeowner may refinance when rates drop low

when is refinancing a mortgage advisable?

when interest rates decline & a homeowner plans to stay in the same house long enough for the savings from lower mortgage payments to recover the cost of refinancing


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