Types of Taxable Income

Question 1

3 categories of income

Answer 1

Earned
Portfolio
Passive

Question 2

What qualifies as earned income?

Answer 2

Salaries and wages; also royalties, retirement payments, and alimony

Question 3

What is the maximum tax rate for stock dividend income?

Answer 3

15%, 20% for high earners

Question 4

What is a capital gain?

Answer 4

Gains realized from sale of assets. Includes stocks, bonds, real estate, etc

Question 5

how much excess capital gains losses can be used to deduct earned income?

Answer 5

$3000; excess carries over

Question 6

How are short term capital gains treated?

Answer 6

If holding period of an asset is 12 months or less, taxed at normal rate

Question 7

How are long term capital gains taxed?

Answer 7

15% or 20% for high income

Question 8

What qualifies as passive income?

Answer 8

real estate investments and limited partnership interests

Question 9

What is the medicare tax on unearned income?

Answer 9

3.8%

Question 10

Progressive vs Regressive tax

Answer 10

Progressive: higher tax brackets as income increases

Regressive: same tax for all

Question 11

What is the tax rate for bond dividends?

Answer 11

Normal rate