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What Does Medicaid Cover?
Medicaid will cover many things, but it is reserved for those without enough assets to get such care on their own or to pay for other coverage. Some examples of covered services include checkups and childbirth for low income pregnant women, and nursing home care for low-income elderly people with long term care needs. Medicaid covers a very wide range of medical costs, including hospital expenses, visits to the doctor, nursing home expenses, and so on. Continue reading...
What is Publication 17 for Individual Federal Income Taxes?
IRS Link to Publication — Found Here The Publication 17 is a very large and detailed guide to help individuals correctly file their federal income tax returns. Form 1040, 1040-A, and 1040-EZ are the return forms used by individuals for federal income tax, but most people won’t know which one to use without either consulting a tax professional or reading this handy 290-some-odd page document. There are many ins-and-outs when it comes to filing federal income tax returns, and Publication 17 is robust enough to clear up many of the questions that might be asked by non-professional filers and CPAs alike. Issues such as filing status, charitable contributions, and a list of instructions for deductions individuals can take, are all listed, among other things. Continue reading...
What is a Lifeline Account?
Lifeline accounts are offered by some banks, and are required in some states to be offered by all banks — they give low-income individuals an opportunity to bank without paying fees or observing a minimum balance. This is done in an effort to promote social mobility by giving everyone access to banking services. You are likely to be able to find a bank that offers free checking accounts anyway, but some states have mandated that banks allow for so-called “lifeline accounts,” which have fewer features than other checking accounts but which may be the only banking option available for low-income banking customers. Continue reading...
What is an FHA Loan?
The Federal Housing Act of 1934 sought to make it easier for Americans to buy homes. It was believed and still is today to an extent that homeownership is a positive foundation for a healthy economy because it provides stability to communities, facilitating healthy family life, community involvement, and the development of businesses in an area where a community will support the business. The Federal Housing Administration runs the FHA loan program with the help of certified lending institutions. FHA loans are a way for lower income earners to be able to purchase a home. Continue reading...
What is a Home Lien?
A lien is a legal filing through which a third party lays claim to certain assets, such as a person’s home, until an amount owed to them is paid. There are mechanic’s liens, judgment liens, and tax liens, any of which could be applied to a person’s home. A lien is a document serving as notice that a significant amount of money is owed to a third party and that certain assets of the debtor may be used to cover the obligation, becoming the property of the lien-holder if the debt is not paid in time. Continue reading...
What is Income?
Income is a stream, series, or lump sum of cash or cash equivalents that is paid to an individual or entity based on work performed, goods sold, ownership rights, or by being a creditor to whom interest is paid. It is received when a net result is positive, and is sometimes referred to as the “bottom line.” Income can be viewed from a itemized, current perspective or as a balance sheet item for an entire accounting period, such as a year. It also might be discussed as a gross (pre-tax) or net (post-tax) amount. Continue reading...
What is Operating Income?
Operating income is essentially another term for EBIT, or earnings before interest and taxes. It is a company’s profits (revenue - COGS) minus operating expenses and depreciation. Operating income is different from net income in that it does not account for expenses such as taxes, interest from debt payments, or outside business activities. It offers a pure look at how a company effectively generates cash from internal operations. Continue reading...
What is Income Risk?
Income risk is the chance that an investment which is used for income will fluctuate in an unfavorable way if the interest rate environment or market conditions change. Some mutual funds and ETFs are branded as income funds when they use lots of corporate bonds that generate regular income payments, but they are often sensitive to interest rate changes. The Federal Reserve Board and the market can affect changes in the interest rate environment as times goes on. Continue reading...
What is residual income?
Residual income is a stream of income that persists from one work project or investment. Residual income is also known as passive income, and is income which comes from an investment of money or work in the past, where minimal or no additional money, work, or maintenance is required. Residual income could come from investments such income-generating real estate, or work completed such as a published book or acting in a commercial. Continue reading...
What is the Form 6251: Alternative Minimum Tax, Individuals?
IRS Link to Form — Found Here The Form 6251 is used to calculate the alternative minimum tax (AMT) for individuals who may have high income but relatively low taxes due after deductions. The individual first computes his or her adjusted gross income, which does not allow for some deductions that may have been taken for the tax filing. If the AMT is higher than the taxes already paid, the individual will have to pay the difference. Continue reading...
What is Net Income?
Net income is the amount of earnings left over once expenses have been deducted from sales. In short, it is the net amount of profit or loss. It is calculated by taking total earnings in a period (such as a quarter), and deducting all elements of the cost of doing business (labor, depreciation, fixed expenses, overhead, etc…) Net income is ultimately a measure of a company’s profitability, and its calculation should be scrutinized closely to ensure all expenses are being accounted for accurately. Continue reading...
What is Gambling Income?
IRS Link to W2-G Form — Found Here IRS Link to Form 1040 — Found Here Winnings from gambling activity must be reported as income, and they will be subject to different kinds of taxes depending on how they were won and the amount. If you win over a certain amount through a lottery, raffle, horse track, keno game, slot machine, poker tournament, or other form of gambling, it will all be taxed at a 25% rate and will have to file form W2-G. Lesser winnings will still need to be reported as income. If an individual wins over $600, less the amount of the wager, and it is over 300 times the amount of the bet, they must file a W2-G on their taxes. Continue reading...
What is Income Property?
An income property is also called an investment property, which is a piece of developed commercial or residential real estate that is used by a third party tenant who makes rental or lease payments for the use of it. Income property can be a good source of income for an individual or business. It can include single- or multi-family residential or commercial properties. Sometimes people co-own income properties together, and receive a proportionate share of the proceeds according to the amount of the start-up capital they paid in. Continue reading...
What is Income Tax?
Income tax is paid to the government based on the amount of income earned. There are federal income taxes, and some states have their own income taxes, too. As an employee for a company, income taxes will be withheld from paychecks using the company’s best estimation of your annual earnings. At the end of the year it may turn out that they withheld too much, and the government may give you a tax refund for what was overpaid. Continue reading...
What is Investment Income?
Also referred to as passive income, investment income is money paid to an investor from the dividends, premiums sold, or sale of assets in their portfolio. Some investors treat it like a part-time job, such that there is nothing passive about it. In retirement, investors often receive income from bonds, preferred stock, and dividend-paying common shares. Income can be pulled from several kinds of investments, including real estate, and it is likely to be taxed at ordinary income tax rates. Continue reading...
What Qualifies You as a "Trader," and How Do You Report Income and Expenses?
If you buy and sell securities, you may qualify for tax status as a ‘trader,’ which importantly may qualify you for certain business tax breaks. The rules governing this status can be confusing, however, making it difficult to determine whether you qualify as a trader, investor, or dealer. Let’s take a closer look at the qualifications for traders as defined by the IRS, as well as how to report income and expenses if qualified. Continue reading...
What is a Keogh plan?
Keogh plans are any type of qualified plan at a sole proprietorship or partnership. Keogh plans come in various forms, and this is because they are actually quite a broad category. IRS Publication 560 (found here) divides workplace retirement plans into SIMPLE IRAs, SEP IRAs, and Qualified Plans. This last category, Qualified Plans, includes profit-sharing plans, 401(k)s, 403(b)s, money purchase plans, and defined benefit plans such as pensions and salary continuation plans. Continue reading...
What Are the Contribution Limits for My SEP IRA?
SEPs contain only employer contributions, and they must contribute the same percentage of every employee’s compensation. As of 2016, an employer may contribute the lesser of either 25% of an employee’s compensation or $53,000 annually. An important thing to note is that the employer decides whether to contribute to the employees’ SEP IRA each year; the employer is not required to make continuous yearly contributions. The equal treatment of all employees with respect to the retirement plans is a fundamental principle of all employer-sponsored retirement programs. Continue reading...
What is the Income of the Average American?
This is a simple question, but one that varies almost exclusively based on geographical location (cost of living). According to the US Census Bureau, in 2008, the Median Household Income for the state of Mississippi was $37,818, while the figure for Maryland was $70,482. In California, the average was at $61,017, and in Arkansas it was $38,820. Since the cost of living is drastically different in various states, counties, and even cities, the figure changes drastically. In San Francisco, California, for example, the median income for 2008 was $71,957, while in Billings, Montana, the figure was $35,147 (less than half as much). Continue reading...
What are Fixed Income Funds?
Fixed income funds may not be used for income at all, but are relatively safe investments that primarily consist of dividend-paying bonds. Fixed income funds, also known as bond funds, invest primarily in bonds, but might also include some preferred stock, which pays regular dividends and behaves much like debt instruments. In fact, there are also Preferred Stock Funds and ETFs that fit into this category. Continue reading...