All > Business > Finance > Investment
Short-term, highly liquid government securities issued at a discount from the face value and returning the face amount at maturity.
- Browse Related Terms: Agency Securities, BA (Banker's Acceptance), Banker’s Acceptance (BA), CDs (Certificates of Deposit), Certificates of Deposit (CD), Commercial Paper, Corporate Bond, Coupon, Federal Funds Rate, Federal Reserve Board, Maturity Date, money-market fund, Moody's Corporate Ratings, Moody's Short-term Debt Ratings, Principal, Salomon Brothers Broad Investment-Grade (BIG) Bond Index, T-Bill (Treasury Bill), Treasury bill (T-bill), Treasury Bond or Note
All > Business > Finance > Personal Finance
When a broker places your order for a security, and then immediately places an order for his or her own account for the same security, the broker is tailgating.
Although this practice isn't illegal, it is considered unethical, because the assumption is that the broker is trying to profit from information the broker believes you have about the stock.
A broker will typically tailgate only when you buy stock in a sufficient quantity to potentially affect the price of the security.
- Browse Related Terms: capital gain or loss, Contingency order, Day trader, Floor trader, home equity, Limit order, Limit price, Markdown, markup, Stop price, Stop-limit order, Tailgating, Trader
All > Business > Finance > Personal Finance
A target date fund is a fund of funds that allows you to link your investment portfolio to a particular time horizon, typically your expected retirement date.
In fact, a target date fund characteristically has a date in its name, such as a 2015 Fund or a 2030 Fund.
A target fund aiming at a date in the somewhat distant future tends to have a fairly aggressive asset allocation, with a focus on growth. As the target date approaches, the fund is designed to become more conservative to preserve the assets that have accumulated and eventually to provide income.
Each fund company formulates its own approach to risk, so that the allocation of one 2025 Fund may be noticeably different from the allocation of a 2025 Fund from a different company.
You can find model portfolios and statements of investment strategy in the fund's prospectus. Each mutual fund company that offers target date funds tends to offer a series, with dates five or ten years apart.
Most companies populate their funds of funds with individual funds from their fund family, though some companies add mutual funds or exchange traded funds from other investment companies.
Like other funds of funds, the fees you pay for a target date fund may be higher than you would pay to own each of the individual funds separately. However, these fees pay for an additional level of professional oversight.
- Browse Related Terms: Asset allocation, Asset class, Balanced fund, diversification, Family of funds, Financial plan, Fund of funds (FOF), Lifecycle fund, Modern portfolio theory, Nonsystematic risk, Overweighted, portfolio, subclass, Synthetic investment, Target date fund, Target risk fund, Underweighted, White knight
All > Business > Finance > Personal Finance
A target risk fund is a fund of funds that maintains a specific asset allocation in order to provide an essentially level exposure to investment risk.
You may find a target risk fund attractive if you want a professional manager to keep your portfolio aligned with your risk tolerance as you pursue specific investment goals.
Target risk funds are generally available with conservative, moderate, and aggressive portfolios, and some mutual fund companies offer even more finely tuned approaches.
Like other funds of funds, the fees you pay for a target risk fund may be higher than you would pay to own each of the individual funds separately. However, these fees pay for an additional level of professional oversight.
- Browse Related Terms: Asset allocation, Asset class, Balanced fund, diversification, Family of funds, Financial plan, Fund of funds (FOF), Lifecycle fund, Modern portfolio theory, Nonsystematic risk, Overweighted, portfolio, subclass, Synthetic investment, Target date fund, Target risk fund, Underweighted, White knight
All > Business > Finance > Personal Finance > Income Tax
A tax on products imported from foreign countries.
Also listed in:
- All > Technology > Telecommunications
- All > Transportation > Maritime
- All > Travel > Tourism
All > Business > Finance > Personal Finance > Income Tax
An action taken to lessen tax liability and maximize after-tax income.
- Browse Related Terms: direct tax, indirect tax, informal tax legislation process, Internal Revenue Service (IRS), mass tax, nullification, Revenue, sin tax, tax avoidance, voluntary compliance
All > Business > Finance > Personal Finance
A tax bracket is a range of income that is taxed at a specific rate.
In the United States there are six brackets, taxed at 10%, 15%, 25%, 28%, 33%, and 35% of the amount that falls into each bracket.
For example, if your taxable income was high enough to cross three brackets, you'd pay tax at the 10% rate on income in the lowest bracket, at the 15% rate on income in the next bracket, and at the 25% rate on the rest.
The rates remain fixed until they are changed by Congress, but the dollar amounts in each bracket change slightly each year to adjust for inflation.
In addition, the income that falls into each bracket varies by filing status, so that if you file as a single taxpayer you may owe more tax on the same taxable income as a married couple filing a joint return.
- Browse Related Terms: Effective tax rate, flat tax, Marginal tax rate, Private letter ruling, Progressive tax, Regressive tax, Tax bracket
All > Business > Finance > Personal Finance > Income Tax
The official body of tax laws and regulations.
- Browse Related Terms: federal income tax, infant industry, protective tariff, public goods and services, revenue tariff, tariff, tax code, Tax credit, tax cut, tax evasion
All > Business > Finance > Personal Finance
A tax credit is an amount you can subtract from the tax you would otherwise owe. Unlike a deduction or exemption, a credit is a dollar-for-dollar reduction of your tax bill.
For example, if you pay someone to care for your young children or for elderly or disabled relatives, you may be able to subtract that money, up to a set limit.
Among the other tax credits for which you may qualify are the Hope Scholarship and Lifetime Learning education credits, a credit for purchasing a hybrid car, or a credit for adopting a child. The list changes from time to time.
Some but not all credits are available to people whose income is less than the ceilings Congress sets. Other credits are available to anyone who has spent the money.
- Browse Related Terms: adjusted gross income (AGI), Alternative minimum tax (AMT), Deduction, Earned Income Credit (EIC), Exemption, Head of household, Modified adjusted gross income (MAGI), Real property tax, Tax credit
All > Business > Finance > Personal Finance > Income Tax
A dollar-for-dollar reduction in the tax. Can be deducted directly from taxes owed.
- Browse Related Terms: federal income tax, infant industry, protective tariff, public goods and services, revenue tariff, tariff, tax code, Tax credit, tax cut, tax evasion
Also listed in:
All > Business > Finance > Personal Finance > Income Tax
A reduction in the amount of taxes taken by the government.
- Browse Related Terms: federal income tax, infant industry, protective tariff, public goods and services, revenue tariff, tariff, tax code, Tax credit, tax cut, tax evasion
All > Business > Finance > Personal Finance > Income Tax
An amount (often a personal or business expense) that reduces income subject to tax.
- Browse Related Terms: adjusted gross income (AGI), Citizen or Resident Test, dependency exemption, dependent, exemptions, filing status, foster child, Head of Household filing status, Married Filing Joint filing status, Married Filing Separate filing status, personal exemption, qualifying child, qualifying relative, Qualifying Widow(er) filing status, single filing status, standard deduction, tax deduction, tax-exempt interest income
All > Business > Finance > Personal Finance
A tax-deferred account allows you to postpone income tax that would otherwise be due on employment or investment earnings you hold in the account until some point the future, often when you retire.
For example, you can contribute pretax income to employer sponsored retirement plans, such as a 401(k) or 403(b).
You owe no tax on any earnings in these plans, or in traditional individual retirement accounts (IRAs), fixed and variable annuities, and some insurance policies until you withdraw the money. Then tax is due on the amounts you take out, at the same rate you pay on your regular income.
A big advantage of tax deferral is that earnings may compound more quickly, since no money is being taken out of the account to pay taxes. But in return for postponing taxes, you agree to limited access to your money before you reach 59 1/2.
- Browse Related Terms: 401(k), 401(k) Plan, 403(b), 457, After-tax contribution, After-tax income, Automatic enrollment, CAP, Catch-up contribution, earned income, Employee stock ownership plan (ESOP), Excess contribution, Health Savings Account (HSA), High deductible health plan (HDHP), Highly compensated employees, Independent 401(k), Individual retirement account (IRA), Individual retirement annuity, individual retirement arrangement (IRA), Keogh plan, Matching contribution, Money purchase plan, Pretax contribution, Pretax income, Profit sharing, Recharacterization, Required beginning date (RBD), Roth 401(k), Roth IRA, Salary reduction plan, SIMPLE, Simplified employee pension plan (SEP), Tax-Deferred
All > Business > Finance > Personal Finance > Retirement
Any type of contribution, compensation, or investment that is not taxed until the member receives the funds according to the program’s guidelines.
- Browse Related Terms: 401(k) Savings Plan and 457 Savings Plan, Average Final Compensation (AFC), Defined Contribution Plan, Direct Rollover, IRC Section 401(a), Lump-Sum Distribution, Qualified Domestic Relations Order (QDRO), Qualified Plan, Rollover, Roth 401(k) Savings Plan, Single-Sum Distribution, Tax-Deferred
All > Business > Finance > Personal Finance
When a mutual fund minimizes the income earnings and capital gains it distributes to its shareholders, it may be described as a tax-efficient fund.
In general, the smaller a fund's turnover, or the less buying and selling it does, the more tax-efficient it has the potential to be. That's one reason why index funds, which buy and sell investments only when the composition of the index they track changes, are generally tax-efficient.
In addition to reducing turnover, actively managed funds may increase tax efficiency by emphasizing investments expected to grow in value over those that produce current taxable income, or yield. And they may postpone the sale of certain investments until they qualify as long-term capital gains, making them subject to a lower tax rate.
Funds that emphasize tax efficiency generally include that goal in their statement of investment objectives.
- Browse Related Terms: Contrarian, equity fund, Global fund, Growth and income fund, income fund, International fund, Investment objective, Portfolio turnover, Prospectus, Real estate investment trust (REIT), Tax-efficient funds, Transparency, Turnover ratio, Value fund, Vulture fund, World fund
All > Business > Finance > Personal Finance > Income Tax
A failure to pay or a deliberate underpayment of taxes.
- Browse Related Terms: federal income tax, infant industry, protective tariff, public goods and services, revenue tariff, tariff, tax code, Tax credit, tax cut, tax evasion
All > Business > Finance > Personal Finance > Income Tax
A part of a person's income on which no tax is imposed.
- Browse Related Terms: business, exempt (from withholding), Federal Insurance Contributions Act (FICA) Tax, Investment Income, lobbyist, Medicare tax, payroll taxes, self-employment tax, Social Security Tax, support, tax exemption, taxable interest income
All > Business > Finance > Personal Finance > Income Tax
The amount of tax that must be paid. Taxpayers meet (or pay) their federal income tax liability through withholding, estimated tax payments, and payments made with the tax forms they file with the government.
- Browse Related Terms: amount due, deficit, Direct Deposit, inflation, interest, interest income, nonrefundable credit, Refund, refundable credit, tax liability (or total tax bill), taxes, withholding ("pay-as-you-earn" taxation)
All > Business > Finance > Personal Finance > Income Tax
Computer software designed to complete tax returns. The tax preparation software works with the IRS electronic filing system.
- Browse Related Terms: Appeal, Authorized IRS e-file Provider, electronic filing (e-file), electronic preparation, Electronic Return Originator (ERO), Federal/State e-file, file a return, Intermediate Service Provider (ISP), IRS e-file, Personal Identification Number (PIN), Software Developer, tax preparation software, transmit, transmitter, Volunteer Income Tax Assistance (VITA)
All > Business > Finance > Personal Finance > Income Tax
The process that occurs when a tax that has been levied on one person or group is in fact paid by others.
- Browse Related Terms: gasoline excise tax, long-distance telephone tax refund, luxury tax, market economy, property taxes, resources, tax shift, telephone tax refund, user fees, user tax
All > Business > Finance > Personal Finance
Some investments are tax exempt, which means you don't have to pay income tax on the earnings they produce.
For example, the interest you receive on a municipal bond is generally exempt from federal income tax, and also exempt from state and local income tax if you live in the state where the bond was issued.
However, if you sell the bond before maturity, any capital gain is taxable.
Similarly, dividends on bond mutual funds that invest in municipal bonds are exempt from federal income tax. And for residents of the issuing state for single-state funds, the dividends are also exempt from state and local taxes.
Capital gains on these funds are never tax exempt.
Earnings in a Roth IRA are tax exempt when you withdraw them, provided your account has been open for five years or more and you're at least 59 1/2 years old. And earnings in 529 college savings plans and Coverdell education savings accounts (ESAs) are also tax exempt if the money is used to pay qualified education expenses.
When an organization such as a religious, educational, or charitable institution, or other not-for-profit group, is tax-exempt, it does not owe tax of any kind to federal, state, and local governments. In addition, you can take an income tax deduction for gifts you make to such organizations.
Also listed in:
All > Business > Finance > Personal Finance > Income Tax
Interest income that is not subject to income tax. Tax-exempt interest income is earned from bonds issued by states, cities, or counties and the District of Columbia.
- Browse Related Terms: adjusted gross income (AGI), Citizen or Resident Test, dependency exemption, dependent, exemptions, filing status, foster child, Head of Household filing status, Married Filing Joint filing status, Married Filing Separate filing status, personal exemption, qualifying child, qualifying relative, Qualifying Widow(er) filing status, single filing status, standard deduction, tax deduction, tax-exempt interest income