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Intermediate2.5 hours21 terms

Essential Taxable Investment Account Terms

This curated collection includes key terms that might be helpful when exploring taxable investment accounts. It covers common account types, investment vehicles, and crucial tax implications for building wealth outside of retirement plans. These terms were selected based on common questions and areas where investors often need clarity.

Term Collection

1

Dividend Income

A payment made by a company or investment fund to its shareholders, typically from its profits, representing a share of earnings. For real estate investors, this often comes from Real Estate Investment Trusts (REITs).

Beginner5 min
2

Tax Loss Harvesting

A tax strategy where investors sell assets at a loss to offset capital gains and a limited amount of ordinary income, reducing their overall tax liability.

Intermediate5-6 min
3

Rental Property

A rental property is real estate purchased with the intent to generate income through tenant rent payments and potential property value appreciation.

Beginner13-14 min
4

Adjusted Basis

The adjusted basis is the original cost of an asset, such as real estate, plus the cost of any capital improvements, minus any depreciation deductions and certain other adjustments. It's crucial for calculating taxable gains or losses upon sale.

Intermediate13-14 min
5

Exchange-Traded Fund

An Exchange-Traded Fund (ETF) is an investment fund that holds a diversified basket of assets like stocks or bonds and trades on stock exchanges throughout the day, offering flexibility and often lower costs.

Beginner6 min
6

Mutual Fund

A mutual fund is a type of investment vehicle that pools money from many investors to invest in a diversified portfolio of stocks, bonds, or other securities, managed by a professional fund manager.

Beginner5-6 min
7

1031 Exchange

A 1031 Exchange allows real estate investors to defer capital gains and depreciation recapture taxes when selling an investment property by reinvesting the proceeds into a new "like-kind" investment property within strict IRS timelines.

Advanced15-18 min
8

Closing Costs

Closing costs are the various fees and expenses incurred by buyers and sellers at the end of a real estate transaction, covering services like loan origination, title insurance, appraisal, and legal fees.

Intermediate13-14 min
9

Property Appreciation

Property appreciation is the increase in a real estate asset's value over time, driven by market forces and investor improvements, leading to potential profit upon sale.

Beginner11-12 min
10

Equity

Equity in real estate is the portion of a property's value that an owner truly owns, free and clear of any outstanding debts or liens. It is calculated as the property's current market value minus the total amount owed on any mortgages or loans.

Beginner12-13 min
11

Capitalization Rate

The Capitalization Rate (Cap Rate) is a real estate valuation metric used to estimate the potential rate of return on an investment property, calculated by dividing its Net Operating Income (NOI) by its current market value.

Intermediate14-15 min
12

Mortgage

A mortgage is a loan obtained from a lender to purchase real estate, where the property itself serves as collateral for the debt. Borrowers make regular payments, including principal and interest, over a set period until the loan is fully repaid.

Beginner15-18 min
13

Net Operating Income

Net Operating Income (NOI) is a key real estate metric representing a property's annual income after deducting all operating expenses, but before accounting for debt service, income taxes, and capital expenditures.

Intermediate11-12 min
14

Investment Account

An investment account is a financial account used to hold various investment assets, such as stocks, bonds, mutual funds, and real estate-related securities, facilitating wealth accumulation and specific financial goals.

Intermediate5 min
15

Passive Income

Passive income refers to earnings from an enterprise in which an individual is not actively involved, typically generated from real estate investments like rental properties, REITs, or syndications, requiring minimal ongoing effort after initial setup.

Intermediate13-15 min
16

Down Payment

A down payment is an initial upfront payment made when purchasing a property, representing a portion of the total purchase price and reducing the amount of money borrowed through a mortgage.

Intermediate15-18 min
17

Long-Term Capital Gains

Long-Term Capital Gains are profits from selling an asset held for more than one year, typically taxed at lower, preferential rates compared to ordinary income, making them a key consideration for real estate investors.

Intermediate12-15 min
18

Short-Term Capital Gains

Short-term capital gains are profits from the sale of an asset, such as real estate, held for one year or less, and are taxed at an investor's ordinary income tax rate.

Intermediate12-15 min
19

Real Estate Investment Trust

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate, allowing individuals to invest in large-scale property portfolios through publicly traded shares.

Intermediate15-18 min
20

Capital Gains Tax

Capital Gains Tax is a tax on the profit realized from the sale of a non-inventory asset, such as real estate, calculated as the difference between the selling price and the adjusted cost basis.

Intermediate13-14 min