Unit 4 Flashcards
Tax that requires higher-income taxpayers to pay proportionately more in taxes, through either higher tax rates or other rules
Progressive Tax
Tax that places a disproportionate financial burden on lower-income taxpayer
Regressive tax
Tax levied bu the U.S. Government on earned income to fund Social Security and Medicare
FICA Payroll Tax
The amount of income on which taxes must be paid
Taxable income
Tax rate imposed on the taxpayers next dollar of income
Marginal Tax Rate
Range of taxable income to which a particular mtr applies
Tax bracket
Total percentage of total taxable income you pay in taxes
Average tax rate
Change in taxes owed as a result of a financial decision
Marginal tax effect
Identifies household type
Marginal tax effect
Unmarried or legally separated
Single
Married couple filing a single tax return
Married filing jointly
Each spouse files their own tax return
Married filing seperately
Single person who lives with and pays more than half of the support of a child or relative
Head of household
Person whose spouse died within two years of tax year and who lives with and lays more than half of the support for a dependent child
Qualifying wifi with dependent child
Earned income and unearned income minus certain allowed adjustments to income
Adjusted Gross Income
Wages, salaries, tips, bonuses, commission, and self-employment income
Earned income
Interest, dividends, capital gains, rents, royalties, and net business income.
Unearned income
Dollar amount based on filing status that is subtracted from Adjusted Gross Income in calculating taxable income
Standard deduction
An alternative to the standard deduction in which the taxpayer reports and deducts actual expenses in certain allowed categories to arrive at taxable income
Itemized deduction
Income from all sources
Gross income
Illegal method of deliberately failing to pay taxes legally owed
Tax evasion
Legal. The arrangement of one’s financial affairs to minimize tax liability.
Tax avoidance
Reimbursement account for qualified medical and child-care expenses
Flexible spending account
An investment account where you pay tax when you withdraw the money
Traditional IRA
An Individual retirement account in which you pay taxes now and the funds are tax free when you withdraw them.
Roth IRA
