Exam Review Notes for Chapters 4-7: CA2351

• Sales Taxes: Taxes on sales of goods/services.

• Payroll Taxes: Taxes from employee wages for social security and healthcare.

• Withholdings: Portion of wages withheld for taxes.

• Flat Tax: Same tax rate for all income levels.

• Progressive Tax: Tax rate increases as income rises.

• Property Tax: Based on property value.

• AGI (Adjusted Gross Income): Total income minus specific deductions.

Tax Filings and Types

• Qualifying Children and Relatives: Criteria for dependents.

• Date Married for Federal Tax Purposes: Affects filing status and tax liability.

• Filing Status: Determines tax rates and deductions; includes single, married, etc.

• Taxable Income: Total income after deductions.

• Common Itemized Deductions: Specific expenses deducted from taxable income.

• Standard vs. Itemized Deductions: Choose higher for tax savings.

Tax Calculation Concepts

• Marginal Tax Rate: Rate on the last dollar of income.

• Tax Bracket: Income range for different tax rates.

• Effective Tax Rate: Total tax owed divided by total income.

Capital Gains and Tax Credits

• Long-term Gains: Profits from assets held over a year, taxed at lower rates.

• Short-term Gains: Profits from assets held for a year or less, taxed at ordinary rates.

• Tax Credit: Direct tax reduction; can be refundable or nonrefundable.

Payment Methods and Financial Precautions

• Payment Options:

  • Certified Check: Bank-guaranteed check.

  • Money Order: Pre-specified payment order.

  • Cashier's Check: Bank-drawn check.

  • FDIC/NCUA Insurance: Protects bank/credit union deposits.

Loan Fundamentals and Financial Risks

• Three Elements of a Loan: Principal, interest, term.

• Finance Charge: Total borrowing cost.

Credit and Lending Knowledge

• Variable Installment Loan: Payments can change.

• Credit Reports: Detail credit history.

• FICO Score Range: 300-850 credit score range.