Health Insurance Glossary

Copay: a fixed amount paid for certain in-network medical services and prescriptions.

Coinsurance: percentage shared cost of covered services.

Deductible: the amount paid out of pocket each year before the health plan makes payments for certain services.

Expense Ratio of Mutual Funds

Cited from Expense Ratio

An expense ratio is determined through an annual calculation, where a fund's operating expenses are divided by the average dollar value of its assets under management (AUM).

Income Tax

Cited from the book "Tax Made Simple: Income Taxes Explained in 100 Pages or Less"

Chapter 1 Basics

1. The filing status is based on the marital and family status on the last day of the tax year.
2. Marginal tax rate: the tax rate you would pay on one additional dollar of income.
3. Effective tax rate: the total amount of income tax divided by the taxable income. 

 Chapter 2 Exemptions, Deductions and Credits

1. Deductions and exemptions both reduce the taxable income. 
2. Credit reduces tax.
3. Deductions generally arise from expenses.
4. Total income (sum of all income) - Above the line deductions =  Adjusted Gross Income (the line)
5. Adjusted gross income - Standard deduction or itemized deductions (below the line deductions) - Exemptions = Taxable income
6. Above the line deductions: IRA, health saving account (HSA), and interest paid on student loans.
7. Itemized deductions: charitable contributions, the interest on a home mortgage, and medical/dental expenses.
8. After determining the total amount of tax owed, the dollar value of credits are subtracted.
9. Credits are generally associated with a taxpayer doing something that Congress had decided is beneficial to the community.
10. Credits: qualified education expenses for oneself, the spouse or one of the dependents. 

Chapter 3 Calculating Your Refund

1. Total federal income tax for the year (after subtracting deductions and exemptions) - the amount withhold for the federal income tax throughout the year = refund or repay
2. The amount of withholding is abased upon the estimate of a taxpayer's income and how many exemptions a taxpayer will be claiming.
3. The employer withholds for federal income tax, Social Security tax, Medicare tax, and state income tax.
4. The Social Security tax and the Medicare tax are calculated as 6.2% and 1.45% of the earnings, respectively. Before paying the income taxes, 7.65% of the income has been withheld.

Chapter 4 Taxable Income

1. The taxable income could include any of the following types of income, each of which has its own unique tax treatment: 
   • Earned income (salary, wages, earnings from self-employment, etc)
   • Interest income
   • Dividend income
   • Passive income (rental income) 
   • Capital gains (the sale of stock)
2.  Earning from self-employment is subject to the same income tax rate as the employed and additionally the self-employment tax (2 times of Social Security and Medicare taxes combined),  but is not subject to Social Security and Medicare payroll taxes.
3.  Instead of W2, 1099-MISC is used to report income and taxes for self-employment, if income is more than $600.
4. Most interest income is subject to the income tax(es), but is not subject to Social Security and Medicare taxes. It is reported in 1099-INT. Exceptions:
   
   • Interest income from bonds issued by the government and municipalities is not subject to federal income tax, but often subject to state/local income tax. 
   • Interest income from U.S. treasure bills or bonds is subject to federal income tax at the ordinary rate, but not subject to the state/local income tax.
5. Like interest income, income from dividend -- distribution of a corporation's profits to shareholders is subject to the income tax but exempt from Social Security and Medicare taxes.
6. Dividend income is often subject to lower tax rate. If a dividend meets certain requirements, it is called "qualified dividend".
   • Any qualified dividend income that falls in the 39.6%, 25-35%, 10 or 15% tax brackets will be taxed at a rate of 20%, 15% or not taxable at all, respectively.

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