Tax Implications of Financial Decisions

These flashcards cover key vocabulary related to taxation of financial decisions, including capital assets, adjusted basis, and tax planning strategies.

Capital Assets

All assets except inventory and depreciable or real property used in a trade or business.

Adjusted Basis

The original cost of an asset plus or minus certain adjustments such as commissions and improvements.

Short-term Capital Gain

Capital gains from assets held for one year or less.

Long-term Capital Gain

Capital gains from assets held for more than one year.

Exclusion Ratio

The percentage of an annuity payment that is not subject to tax, based on the investment amount compared to total expected return.

Employee Benefits Exclusions

Certain employee benefits that are excluded from taxable income, such as employer-provided health insurance and group term life insurance up to $50,000.

Flexible Spending Account (FSA)

A pre-tax benefit plan that allows employees to set aside money for out-of-pocket medical expenses.

Health Savings Account (HSA)

A tax-advantaged account that allows individuals to save for medical expenses tax-free with contributions that can go into retirement.

Net Capital Gain

The difference between the total capital gains and total capital losses, subject to tax at varying rates.

Tax Planning Strategies

Approaches to minimize tax liabilities, including asset management, timing of income, and understanding exclusions.