Financial Literacy Ch. 8 Vocab

adjusted gross income

Total income minus certain allowable amounts

capital gains

A taxable gain that occurs when you sell 

an asset for more than what you paid for it

gross income

Total amount of a person’s income from (almost) any source

gross pay

The total amount of money earned

Internal Revenue Service (IRS)

The government body that carries out the federal tax system

itemized deduction

Specific expenses that, under tax law, can be deducted from income to reduce the amount of income subject to income tax

Medicare

Provides health care coverage to mostly older Americans and some younger disabled people

net pay

The difference between what workers earn and what they get to keep and use/Same as TAKE HOME PAY

personal income taxes

Federal income taxes and state income taxes (the states that have them)

payroll taxes

Federal and state taxes withheld from a person’s paycheck and sent to the government by their employer 

Social Security

Provides payments to eligible retirees and disabled people

standard deduction

Fixed amount all people are allowed to deduct from their AGI to reduce their tax liability

take-home pay

The difference between what workers earn and what they get to keep and use/Same as NET PAY

tax

Money collected by a government from its citizens for the purpose of operating the government

tax return

A formal report to the IRS that contains all the information relative to a person’s income taxes for a specific year