A payment to federal, state, and/or local governments based on the sales price of a product, on worker income, or on other property and activities.
A tax on the money one makes from labor and/or investments. Income taxes collected by the state and federal governments pay for public programs, defense, and entitlement programs.
Income in the form of dividends, sales profits, or capital appreciation, gained by investing in stocks, bonds, cash, commodities, precious metals, or other assets that can earn money.
Gains in value. In business, growth is measured by the expansion of assets and sales. In securities, it refers to the increase in market prices.
The purchase of a potentially appreciable asset such as a stock, a bond, a property, or a unit of production. The purchase provides funds for the growth of businesses and governments.
A charge for using another's money. Interest is usually stated as a percentage of the amount borrowed and can be charged in a variety of ways, such as accrual, compounding, or simple interest.
A liability in the form of a bond, loan agreement, or mortgage, owed to someone else with the promise of repayment by a certain date, which is the debt's maturity.
The net income of a business, investment, or individual over a specific period, such as a quarter-year.
A bond issued by a government unit, such as a state, city, county, school district, agency, or a subdivision other than the federal government. The interest earned on a municipal bond is usually free of federal income tax, and may be free of local and state tax as well.
A tax on the profits one makes after selling an asset at a profit.
A level stream of equal dollar payments that lasts for a fixed time. An example would be a person's yearly allowance paid out from a lump sum of money he or she invests with an insurance company. This yearly payment continues for a set number of years or until the person's death. The payout may begin at once or may start at a future date.
A contract in which one party, called the insurer, agrees to protect another party, called the insured, against loss, damage, or medical costs in return for a premium. Another way to look at insurance is to see it as the assumption of risk by another party. In return for a periodic fee (the premium) and a set of requirements by which to abide, an insurance company will assume risks taken by those covered. Insurance companies are regulated by the insurance commissioners of their respective states or territories.
Someone who buys an asset for the income it will earn and/or the increased value it will have in the future.
A deposit to a health savings, retirement, or other account. Contributions must be made in cash.
1. A removal of assets from a retirement or other account, paid to the owner or beneficiary of that account. 2. In estate planning, distribution is the passing of personal property to an heir from an intestate person (one who has died without a will). The term is often used with descent, as in descent and distribution laws. 3. In investing, a primary distribution is the original issue of a security to the public. A secondary distribution is the resale of a large block of securities held by stockholders or bondholders, or a block of securities held by a corporation as Treasury securities.
An increase in the value of any asset. The opposite of appreciation is depreciation.
The profits on assets that have been held for more than 12 months and then sold. They are taxed at a lower rate than short-term capital gains. The opposite of a capital gain is a capital loss.
Income other than long-term capital gains, such as wages, salaries, dividends, interest, and net income from businesses.
Residential property leased to others in order to generate income.
The monetary return on one's labor or investments. Income may be wages, salaries, bonuses, dividends, or interest.
A dollar-for-dollar reduction in a taxpayer's tax payment granted by the IRS to taxpayers who meet certain requirements.
1. A regular periodic payment for an insurance policy. 2. An additional cost above the normal cost. 3. The amount by which a security sells above its par value. If an investor buys a $1,000 bond for $1,030, she has paid a premium of $30.
The dollar amount to which the holder of a life insurance policy is entitled if the policy is surrendered to the insurance company after the surrender period.
Postponing of taxes on income to a point in the future.
1. An entity that engages in commercial activities in some particular sector, such as industry, retail, or professional services. 2. The commercial activity in which a business engages.
1. In financial terms, the result of expenses exceeding income. 2. A reduction in the value of an investment.
A special tax classification for certain corporations registered in a state, allowing them to be taxed as a partnership.
A joint, contractual enterprise between two or more people to complete a project in a limited time. Partnerships last the length of the project. The partners can share in the profits and losses to varying degrees.
1. In financial terms, a trust is a type of fiduciary agreement in which one person holds property for the benefit of another person. 2. A group of businesses illegally organized to reduce competition and control prices. 3. The willingness to rely on others. Every aspect of business requires trust so that systems may function smoothly.
Income from investments for which the investor was not considered materially involved or did no work.
An investor whose liabilities are limited only to his investment in the partnership. He is not involved in management, and his profits and losses are proportionate to his investment.
Restriction of loss to the amount invested. Should the company invested in incur debts, each individual is protected from having to pay more than what he or she initially invested.
Revenue left after all expenses--labor, materials, overhead, etc.--are paid. Profit is one of the principal motivations behind investing and business.
An investment in which the investor does not take any role in the management or operation of the investment, as defined by IRS rules and regulations.
1. For individuals, total earnings minus required and elective payroll deductions. Commonly known as take-home pay. 2. For businesses, gross income minus all other expenses.
