Income Tax Review Flashcards 4e

Flashcards about income taxes based on lecture notes.

What is gross income?

The sum of all income, including wages and interest.

What is adjusted gross income (AGI)?

Gross income minus adjustments, such as contributions to a tax-deferred retirement plan.

What is taxable income?

AGI minus deductions and exemptions.

What are the four categories of filing status?

Single, Married filing jointly, Married filing separately, Head of household

What are itemized deductions?

Listing all deductible expenses to find your total deduction.

What is a standard deduction?

Deducting an amount that depends only on your filing status.

What does progressive income tax mean?

People with higher taxable income pay at a higher tax rate.

What are marginal tax rates?

They are assigned to different income ranges or margins.

What happens if the tax credits you are qualified for are refundable?

You will receive this excess credit back from the government.

What happens if the tax credits you are qualified for are nonrefundable?

You will not get any benefit from the excess tax credit.

What does a tax credit do?

Reduces your total tax bill by the full amount of the credit.

What does a tax deduction do?

Reduces your taxable income by the amount of the deduction.

To what does FICA apply?

Income from wages (including tips) and self-employment.

What are capital gains?

Profits from the sale of stock or other property.

What are short-term capital gains?

Profits on items sold within 12 months of their purchase

What are long-term capital gains?

Profits on items held for more than 12 months before being sold.

What are some examples of tax-deferred income plans?

Individual retirement accounts (IRAs), Qualified retirement plans (QRPs), 401(k) plans