Tax Definitions

1. Flat tax- Taxpayers pay the same percentage of their income

2. Progressive tax- Tax increases when percentage of income increases

3. Sales Tax- A consumption tax imposed by government on the sale of goods or services

4. Income Tax- Tax levied by the government based on income

5. Social Security- A federal insurance program where the government provides benefits to retired citizens

6. Medicare- A government medical insurance program for elderly citizens

7. Medicaid- A government medical insurance program for families whose income is insufficient to cover medical expenses

8. W-2- A report of how much income, taxes, and benefits were provided by an employer over a year

9. W-4- A form that employees can fill out to determine how much federal income tax should be withheld from their paycheck

10. 1040 EZ- A form aimed to simplify the tax return process

11. 1098- A mortgage interest statement that a lender uses to report money paid on a home mortgage loan

12. Child Tax Credit- A tax break for families with qualifying children under 17

13. Adjusted Gross Income- Gross income minus adjustments to income

15. Charitable Donations- A gift of cash or property made to a nonprofit organization or religious organizations

16. Itemized Deductions- Expense subtracted from gross income to deduct the amount of taxes that are owed

17. Tax Credit- A provision that reduces a taxpayer’s final tax bill

18. Withholding- A deduction from an employer’s paycheck that is sent directly to the government

19. Filing Status- Determines the rate at which income is taxed

20. Horizontal Equity- All members with similar income and assets should be taxed similarly

21. Vertical Equity- Tax obligations vary in proportion to income