FIN 310 - Taxes

Taxes

Taxes

compulsory payments to the government

Purpose of taxes

fund government spending, change public behavior, and redistribute wealth

Categories of taxes paid

income, capital gains, FICA, excise, property, gift, estate

How do adjustments determine income tax obligation?

Include contributions to retirement plans and student loan interest

How do deductions determine income tax obligation?

Are subtracted from adjusted gross income to make taxable income

How does credit determine income tax obligation?

Reduce the tax payable

Progressive taxes theory

High income taxpayers pay a higher percentage of tax burden

Regressive taxes theory

Lower income taxpayers pay a higher percentage of tax burden

Ordinary income

Wages or profits on assets owned less than one year

Capital gains

Long-term capital gains

Is the profit generated from the sale of an asset owned for longer than a year

Property taxes

Collected and used by local governments for schools, streets, safety, sanitation, parks, common areas, and services

Californian property tax rates

Prop 13 limits property taxes to 1% with 2% maximum growth

Mello-Roos assestments

Temporary by local governments when funds are not available for necessary projects