BUSI 1307: Chapter 4 Vocabulary
Terms
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- excise tax
- a tax imposed on specific goods and services, such as gasoline, cigarettes, alcoholic beverages, tires and air travel
- estate tax
- a tax imposed on the value of a person's property at the time of his or her death
- inheritance tax
- a tax levied on the value of property bequeathed by a deceased person
- taxable income
- the net amount of income, after allowable deductions, on which income tax is computed
- earned income
- money received for personal effort, such as wages, salary, commission, fees, tips or bonuses
- investment income
- money received in the form of dividends, interest or rent from investments; also called portfolio income
- computing taxable income and your tax liability
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step 1: determining adjusted gross income
step 2: computing taxable income
step 3: calculating taxes owed - passive income
- income resulting from busines activities in which you do not actively participate
- exclusion
- an amount not included in gross income
- tax-exempt income
- income that is not subject to tax
- tax-deferred income
- income that will be taxed at a later date
- adjusted gross income (AGI)
- gross income reduced by certain adjustments, such as contributions to an individual retirement account (IRA) and alimony payments
- tax shelter
- an investment that provides immediate tax benefits and a reasonable expectation of a future financial return
- tax deduction
- an amount subtracted from adjusted gross income to arrive at taxable income
- standard deduction
- a set amount on which no taxes are paid
- itemized deductions
- expenses that can be deducted from adjusted gross income, such as medical expenses, real estate property taxes, home mortgage interest, charitable contributions, casualty losses and certain work-related expenses
- exemption
- a deduction from adjusted gross income for yourself, your spouse and qualified dependents
- marginal tax rate
- the rate used to calculate tax on the last (and next) dollar of taxable income
- average tax rate
- total tax due divided by taxable income
- tax credit
- an amount subtracted directly from the amount of taxes owed
- tax audit
- a detailed examination of your tax return by the internal revenue service (IRS)
- tax avoidance
- the use of legitimate methods to reduce one's taxes
- tax evasion
- the use of illegal actions to reduce one's taxes
- capital gains
- profits from the sale of a capital asset such as stocks, bonds or real estate