Term Answer Description Gross income Active income Portfolio income A. This term refers to passive income offset. B. This term includes income from tax shelters. C. This term refers to gross income less adjustments, deductions, and exemptions Passive income This item is taxed at different rates depending on the holding period D. Investment expenses E. This term refers to earnings and capital gains generated from investment holdings Real estate or limited partnership expenses Capital gains Sale of a home F. This term includes wages, salaries, bonuses/commissions, and interest/dividends/alimony This term refers to income earned on the job This term includes expenses that can only offset portfolio G. H. income Taxable income I. Using taxable income, it is based on tax tables or tax rate schedules Tax liability During this transaction, you can exclude the first $250,000 ($500,000 for married taxpayers) of gain on sale Term Answer Description Adjustments A. These are charitable contributions. B. This figure is based on tax bracket, 5% to 15% tax rate if held over 12 months Deductions C. Many of these are based on a percentage of AGI Standard deduction D. This can be claimed if taxpayer provides more than half their support. Itemized deductionE Exemption E. This term includes all income less certain allowable adjustments F. This is adjusted gross income less deductions and exemptions G. This can be either standard or itemized example Capital gains tax categories Steps tO AGI Steps to taxable income H. Taken against gross income, they result in AGI. I. This is adjusted annually for changes in cost of living 1. This is used to calculate limits for certain itemized deductions