Individual Income Tax Exam 1
Exclusions- items specifically removed from the tax base by law
Deductions- subtracted from the tax base rather than fully excluded.
Flat tax- one single rate applied to the entire tax base.
Progressive tax- rates increase as tax base increases. (Federal income tax)
Tax credit- authorized deduction in gross tax liability
Real and personal property taxes- Real (real estate) Personal (difficult to enforce because property is easily concealed or moved, with the exception of vehicles which must be registered)
Excise tax- imposed on sale of specific items (cigarettes, luxury goods, etc.)
Use tax- Purpose is to prevent avoidance of sales tax (i.e. buying goods in Oregon). Imposed on use of personal property
Transfer tax- tax imposed on the right to transfer property, either by gift or inheritance. Tax imposed on the donor. Includes a once-in-a-lifetime exclusion and per donee exclusion. Two categories- Gift and Estate taxes
Gift tax- Allowed a $13,000 per year per donee exclusion (26,000 if given jointly with spouse). Unlimited marital deductions and charitable contribution. Taxable gifts allowed an once-in-a-lifetime credit of $1,730,000 and for the taxable estate, an exemption equivalent of credit of 1,730,000 for 2012 to the extent the credit was not used for the gift tax.
Estate tax- Combined with taxable gifts. Can deduct contributions to spouse and charity. Once-in-a-lifetime exemption equiv. of $5,000,000 to the extent it was not used for gift tax purposes.
FICA tax-Social security and medicare. Employee:S.S- 4.2% $110,000 base medicare-1.45%. Employer:S.S-6.2% medicare- 1.45%
Self-employment tax- same as FICA 13.3% $110,000 base 2.9% in excess of base
FUTA tax- Employer tax. 6.2% on first $7000 of covered wages - Exclusions
= Gross income
- Above-the-line deductions from gross income
= AGI adjusted gross income
- Below-the-line deductions from AGI
1. Itemized deductions or standard deduction (greater of two)
2. Exemption deductions
=
Deductions- subtracted from the tax base rather than fully excluded.
Flat tax- one single rate applied to the entire tax base.
Progressive tax- rates increase as tax base increases. (Federal income tax)
Tax credit- authorized deduction in gross tax liability
Real and personal property taxes- Real (real estate) Personal (difficult to enforce because property is easily concealed or moved, with the exception of vehicles which must be registered)
Excise tax- imposed on sale of specific items (cigarettes, luxury goods, etc.)
Use tax- Purpose is to prevent avoidance of sales tax (i.e. buying goods in Oregon). Imposed on use of personal property
Transfer tax- tax imposed on the right to transfer property, either by gift or inheritance. Tax imposed on the donor. Includes a once-in-a-lifetime exclusion and per donee exclusion. Two categories- Gift and Estate taxes
Gift tax- Allowed a $13,000 per year per donee exclusion (26,000 if given jointly with spouse). Unlimited marital deductions and charitable contribution. Taxable gifts allowed an once-in-a-lifetime credit of $1,730,000 and for the taxable estate, an exemption equivalent of credit of 1,730,000 for 2012 to the extent the credit was not used for the gift tax.
Estate tax- Combined with taxable gifts. Can deduct contributions to spouse and charity. Once-in-a-lifetime exemption equiv. of $5,000,000 to the extent it was not used for gift tax purposes.
FICA tax-Social security and medicare. Employee:S.S- 4.2% $110,000 base medicare-1.45%. Employer:S.S-6.2% medicare- 1.45%
Self-employment tax- same as FICA 13.3% $110,000 base 2.9% in excess of base
FUTA tax- Employer tax. 6.2% on first $7000 of covered wages - Exclusions
= Gross income
- Above-the-line deductions from gross income
= AGI adjusted gross income
- Below-the-line deductions from AGI
1. Itemized deductions or standard deduction (greater of two)
2. Exemption deductions
=