Terminology Flash Cards 10-Taxes

Exemption

• The set amount of money, per dependent, you can subtract from your taxable income

• A tax credit that reduces the amount of tax owed

• A deduction that lowers your taxable income based on your expenses

• A fee paid to the government for tax services

Marginal Tax Rate

• The tax rate applied to your total income.

• The tax bracket that your highest dollar of income falls into, and therefore the highest tax rate you pay.

• The average tax rate you pay on all your income.

• The tax rate that applies to capital gains only.

1099

• A form that details all "non-employee" compensation, including for specific jobs like freelancers or contractors.

• A tax form used for reporting wages paid to employees.

• A document used for reporting interest income from banks.

• A form for reporting capital gains from the sale of assets.

Interest Income

• Income earned through interest on savings accounts, bonds, CDs, etc.

• Income earned from selling goods and services.

• Income generated from investments in stocks only.

• Income received as a gift or donation.

Mandatory Spending

• Spending by the federal government required by previously existing laws, including funding programs like Social Security and Medicare/Medicaid

• Discretionary spending that can be adjusted by the government each year

• Funding for military operations and defense contracts

• Voluntary contributions made by citizens to support government programs

Medicare

• A government-run insurance program that provides healthcare assistance to elderly and disabled Americans.

• A private insurance plan for young adults.

• A state-funded program for low-income families.

• An international health insurance scheme for travelers.

Capital Gain

• Profit from the sale of an asset, such as a stock or a bond, calculated by subtracting the price you initially paid from the price you then sold it for.

• A tax imposed on the profit from the sale of an asset.

• The total value of an asset after depreciation.

• The increase in value of an asset over time without selling it.

1040

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

• A form used for reporting business income and expenses.

• A form for claiming tax credits and deductions.

• A form for reporting foreign bank accounts.

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.

• A document used by employers to report employee earnings to the IRS.

• A tax return form that individuals file annually to report their income and calculate taxes owed.

• A form used to apply for a tax refund from the IRS.

Taxable Income

• The total income before any deductions are made.

• The amount of income that is used to calculate an individual's or a company's income tax due.

• The income that is exempt from taxation.

• The income earned from investments only.