Christian Financial Services

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The difference between the price at which an asset was purchased and the price for which it was sold. When the sale price is higher than the purchase price, the difference is a capital gain; when the sale price is lower than the purchase price, the difference is a capital loss. Cash Alternatives Assets that are most easily converted into cash and which have a very low risk of price fluctuation. For example, money market funds may be considered a cash alternative.

A credit subtracted from income taxes after preliminary tax liability has been calculated. Tax Deduction An amount that can be subtracted from a taxpayer’s income before taxes are calculated. Taxpayers may use the standard deduction or may itemize deductions if allowable itemized deductions exceed the standard deduction. Tax Deferred A condition of certain plans and accounts under which the funds in the plan or account along with any accrued interest, dividends, or other capital gains, are not subject to taxes until the funds are withdrawn.

Roth 401(k) plans are subject to the same annual contribution limits as regular 401(k) plans—$17,500 for 2014, ($23,000 for those over age 50). These are cumulative limits that apply to all accounts with a single employer; an individual couldn’t save $17,500 in a traditional 401(k) and another $17,500 in a Roth 401(k). Another factor to consider is employer matches are made with pretax dollars, just as they are with a traditional 401(k) plans. In a Roth 401(k), however, these matching funds accumulate in a separate account that will be taxed as ordinary income at withdrawal.

A series of income ranges within which a taxpayer’s income is taxed at a certain rate. Taxpayers pay the tax rate in a given bracket only for that portion of their overall income that falls within the bracket’s range. Federal Reserve System (The Fed) The United States’ central bank. The Federal Reserve System consists of a series of 12 independent banks that operate under the supervision of a seven-member, federally appointed board of governors. The Fed strives to maintain maximum employment, stable price levels, and moderate long-term interest rates.

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