Taxes

Question 1

Tax base

Answer 1

The value of income, earnings, property, sales or other valued items which a tax rate is applied. In the case of the personal income tax, the tax base is incremental income.

Question 2

Tax rate

Answer 2

The percentage of the tax base that must be paid to the government as tax.

Question 3

Exemptions

Answer 3

Amounts of money for each household member that can be deducted from household income before personal income tax rates are applied.

Question 4

Standard deduction

Answer 4

A fixed amount of money that tax payers can deduct from their taxable income when calculating their personal income taxes, if other deductions are not claimed.

Question 5

Tax credits

Answer 5

Amounts of money by which the income taxes payable to the government can be directly reduced. A person or business must meet criteria to be eligible for a credit

Question 6

Earned income tax

Answer 6

A federal tax credit for low income working individuals and families. State governments may also utilise an ETC for their personal income tax.

Question 7

Refundable

Answer 7

A refund is available even if an income earner does not pay taxes, as long as he or she files a tax form.

Question 8

Dividends

Answer 8

Profits from the ownership of a stock

Question 9

Capital gains

Answer 9

The net income received when an asset is bought at a particular price and sold at a higher price

Question 10

Payroll taxes

Answer 10

Taxes based on earnings from work and usually deducted directly from the pay

Question 11

Excise tax

Answer 11

Taxes applied to the purchase of specific good or services like cigarettes, alcohol etc