Budgeting and Taxes Vocab

1040

The standard Internal Revenue Service (IRS) form that individuals can use to file their annual income tax returns

50/30/20

A budgeting method that allocates 50% to needs, 30% to wants, and 20% to savings and debt repayment

Adjustable Rate Mortgage

A mortgage in which the initial interest rate is normally fixed for a specified period of time after which it is reset periodically, often every month

Audit

An inspection of a filer’s tax return by the IRS

Auto Lease

An agreement where an individual makes monthly payments to use a car for a certain length of time instead of purchasing the car

Budget

A plan of your expected income and how you will use it to meet your expected expenses over a period of time

Cost of Living

The amount of money needed to sustain a certain level of living, including basic expenses such as housing, food, taxes, and healthcare

Deficit

When your expenses exceed your income

Dependent

Someone you financially support who can be “claimed” on a tax return to reduce your taxable income and lower your taxes

Depreciation

A decrease or loss in value

Discretionary Expense

A non-essential cost that can be adjusted or eliminated from a budget without significantly impacting basic needs

Down Payment

A partial payment made in cash at the beginning of the purchase of the good or service, while the remaining balance is due later or financed as part of a loan

Fixed Expense

A cost that can be expected at regular intervals and that remains the same amount

Fixed Rate Mortgage

A mortgage that has a fixed interest rate for the entire term of the loan as long as on time payments are being made

Gross Income/Gross Pay

Total earnings before any deductions are taken

Home Equity

The value of ownership built up in a home or property that represents the current market value of the house minus any remaining mortgage payments

Insurance Deductible

The amount of money you agree to pay towards your losses before your insurance coverage will begin paying

Insurance Premium

The specified amount of payment required periodically by an insurer to provide coverage under a plan for a defined period of time

Insurance Limit

The maximum amount of money your insurance company will pay for a covered claim

Net Income/Net Pay

Total earnings after payroll taxes and other deductions have been taken out; also called take-home pay

Paycheck Stub

A document attached to every paycheck that details your earnings and the amount withheld for taxes, health insurance, retirement funds, etc.

Pay Yourself First

A method of saving whereby you put a fixed amount of income into a saving account before you pay monthly bills or make purchases

Property Tax

A tax paid on property (real estate) owned by an individual or corporation

Residential Lease

A contract between a tenant and a landlord providing the terms and costs for renting the property

Sales Tax

A consumption tax on the sale of goods and services

Social Security

A federal program that provides monthly benefits to millions of Americans, including retirees, military families, surviving families of deceased workers, and disabled individuals

Surplus

When your income exceeds your expenses and you have money leftover

Tax Bracket

A range of income amounts that are taxed at a particular rate

Tax Deduction

An amount that can be subtracted from a person’s tax liability that lowers their taxable income

Unit Price

The cost for one item or measurement that allows it to be easily compared to other similar products to evaluate which is a better deal

Variable Expense

A cost that appears irregularly or that changes in amount

W-2

A form that an employer must send to an employee and the IRS at the end of the year to report the employee’s annual wages and taxes withheld from their paycheck

W-4

A form completed by an employee to indicate his or her tax situation (exemptions, marital status, etc.) to the employer, who then withholds the corresponding amount of taxes from each paycheck