Income Taxes Flashcards
What are the 3 types of taxes on your paycheck?
- Federal income tax
- State and local income tax
- FICA tax (Social Security and Medicare) = aka “Payroll taxes”
TRUE OR FALSE: Federal and state taxes are applied after deductions, like moving $ into a tax-deferred retirement account.
True
TRUE OR FALSE: FICA tax is before deductions and based on your gross earnings.
True
For Federal income tax, what is the “marginal tax rate”?
the highest rate/level/bracket you’re paying at
For Federal income tax, what is the “effective tax rate”?
The average of all of the marginal rates (that apply to you)
What are the 3 ways you make money through investing?
Capital gains, dividends, interest
What is a “realized gain” v. an “unrealized gain”?
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)
For capital gains taxes, what is the difference between short-term and long-term?
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