Taxes & Tax Shelters - Types of Taxable Income

Question 1

There are three types of income according to the IRS

Answer 1

• earned income
• portfolio income
• passive income

Question 2

Also included in the definition of “earned” income are:

Answer 2

• bonuses
• royalties for writers
• alimony
• SS payments
• retirement benefits

Question 3

Max tax rate for earned income is

Answer 3

39.6%

Question 4

Portfolio income is divided into _____ and ______

Answer 4

investment income and capital gains

Question 5

The max tax rate for cash dividends received by individuals is _____ or ____ for high earners

Answer 5

15% or 20% for high earners ($400k individual, $450k joint) –> DOES NOT APPLY TO BOND INCOME

Question 6

Capital losses can offset capital gains to _____ plus an extra ______

Answer 6

offset them to $0, and then an extra $3,000

Question 7

Short term capital gains are taxed at ____, long term capital gains taxed at ____

Answer 7

up to 39.6%, long term at 15% or 20%

Question 8

In computing amount of long term capital gains, ____ capital losses (____ and ____) can be counted

Answer 8

all capital losses can be used, both short term and long term

Question 9

Passive income is defined as income derived from _____ and _____

Answer 9

real estate investments and limited partnership interests

Question 10

There is a ____ medicare contribution tax on any unearned income

Answer 10

3.8%

Question 11

Income tax is ______ and has ____ brackets from ___ to ___

Answer 11

income tax is progressive, with 6 brackets from 10% to 39.6%

Question 12

A regressive tax is applied for ______ the same

Answer 12

everyone the same