A method for comparing returns on taxable corporate bonds and tax-free municipal bonds to determine the higher after-tax return. This helps investors make more informed choices considering their tax brackets.
After-tax cash flow in real estate refers to the net cash flow from an income-producing property after accounting for income taxes. It includes the tax savings from any losses that can be offset against other income.
Deferral of taxes allows an individual or business to postpone the payment of taxes from the current year to a later year, providing financial flexibility and potentially reducing the overall tax burden.
Equivalent Taxable Yield is a comparison of the taxable yield on a corporate bond with the tax-free yield on a municipal bond. Depending on the tax bracket, an investor's after-tax return may be greater with a municipal bond than with a corporate bond offering a higher interest rate.
Income shifting is a tax strategy that involves transferring gross income from one taxpayer to another, typically to a taxpayer in a lower tax bracket, in order to reduce the overall tax liability of a group or family.
The marginal tax rate is the tax rate applied to an additional dollar of income, influenced by the progressive nature of income tax systems.
A tax bracket refers to a range of income that is taxed at a specific rate. As income increases and moves into higher brackets, the rate of taxation is adjusted according to predefined thresholds set by the tax authority.
The top rate of income tax is the highest percentage of income that individuals in the highest income bracket are required to pay. This rate often affects high-income earners more significantly.
