Income Taxes Flashcards

1
Q

What are the 3 types of taxes on your paycheck?

A
  1. Federal income tax
  2. State and local income tax
  3. FICA tax (Social Security and Medicare) = aka “Payroll taxes”
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2
Q

TRUE OR FALSE: Federal and state taxes are applied after deductions, like moving $ into a tax-deferred retirement account.

A

True

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3
Q

TRUE OR FALSE: FICA tax is before deductions and based on your gross earnings.

A

True

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4
Q

For Federal income tax, what is the “marginal tax rate”?

A

the highest rate/level/bracket you’re paying at

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5
Q

For Federal income tax, what is the “effective tax rate”?

A

The average of all of the marginal rates (that apply to you)

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6
Q

What are the 3 ways you make money through investing?

A

Capital gains, dividends, interest

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7
Q

What is a “realized gain” v. an “unrealized gain”?

A

Realized gain = the amount of money you make when you sell stocks

Unrealized gain = the amount of money you COULD make when you sell (it’s a changing number)

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8
Q

For capital gains taxes, what is the difference between short-term and long-term?

A

Short-term: anything held for less than 1 year. Taxed at a higher rate

Long-term: anything held for more than 1 year. Taxed at a lower rate

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