Real Estate Investment Flashcards
Adjusted Gross Income
A federal income tax amount that is determined by subtracting amounts specifically authorized by the internal Revenue Code from gross income
Capital Gain or Loss
A gain or loss on the sale of a capital asset
Cash on Cash Return
This shows the return on cash invested. It is calculated by dividing your annual pre-tax cash flow by total cash invested
Cost of Recovery
The recovery of cost through depreciation for accounting and tax purchases
Earned Income
Includes wages, salaries, income from a business or profession, and other earned income
Effective Rate
The average tax rate on all of the individuals’s taxable income
Gross Income
Includes earned income, portfolio income, passive income, and capital gains and losses
Investing
Committing capital to a business in order to earn a financial return or profit based on the business entity’s increase in value
Itemized Deductions
Personal expenses that can be deducted on an income tax return when computing taxable income
Leveraging
Borrowing money from another source to supplement your own funds in completing the acquisition of property
Marginal Rate
The rate of tax on the next dollar of income
Passive Income
Income from a business in which the owner does not materially participate
Portfolio Income
Income that is a return on invested capital, such as interest and dividends
Risk
The degree or possibility of loss on an investment
Speculation
A transaction where the profits are subject to chance; to buy or sell with the hope of profiting through the fluctuations in price
