COMM 300: Taxes

From BluWiki

Tax considerations

• US tax system is progressive
  • the more income you make, the higher the taxes
• Certain expenses are deductible
  • Expenses that you subtract from your operating income in order to reach taxable income
  • Examples include interest expense, depreciation
• Some income is tax-exempt
  • income that isn't taxes
  • dividends received from other corporations
• Tax credits are available for certain investments
  • A direct reduction of your tax bill

Corporate tax rates

Know difference between marginal and average tax rates

Capital gains and losses

• Capital gain: excess of selling price over the original cost of the asset (asset appreciates)
  • tax liability = tax rate x gain
• Recapture of depreciation: excess of selling price over an asset's book value (asset is above book or value after depreciation)
  • tax liability = tax rate x recapture
• Depreciable loss: excess of book value over selling price of the asset (asset that is below depreciated value)
  • tax liability = ???