TAX TERMS & GLOSSARY
Confused by tax jargon? We've got you covered. Here are the most common terms you need to know.
Your gross income minus specific deductions (adjustments) that you are eligible to take, such as student loan interest or IRA contributions. AGI is used to determine your eligibility for certain tax credits and deductions.
A review/examination of an organization's or individual's accounts and financial information to ensure information is reported correctly according to the tax laws and to verify the reported amount of tax is correct.
The profit from the sale of an asset, such as stocks, bonds, or real estate. Capital gains are generally taxable.
A tax credit given to parents or guardians for each qualifying child. This credit reduces the amount of tax you owe.
An amount that can be subtracted from your income to lower the amount of tax you owe. Common deductions include the standard deduction and itemized deductions like mortgage interest.
A person, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption. This is usually a qualifying child or qualifying relative.
A refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children.
Taxes paid quarterly on income that is not subject to withholding, such as income from self-employment, interest, dividends, alimony, or rent.
An amount that a taxpayer can claim for themselves, their spouse, and eligible dependents. It reduces the amount of income on which you are taxed.
A category that defines the type of tax return form a taxpayer must use. Common statuses include Single, Married Filing Jointly, Married Filing Separately, and Head of Household.
All income you receive in the form of money, goods, property, and services that is not exempt from tax.
Expenses that can be deducted from your adjusted gross income to reduce your taxable income. Examples include medical expenses, state and local taxes, and charitable contributions.
A specific dollar amount that reduces the income on which you are taxed. You can choose between the standard deduction and itemizing deductions.
An amount of money that taxpayers can subtract directly from the taxes they owe. Credits are generally more valuable than deductions because they reduce tax liability dollar-for-dollar.
The total amount of tax debt owed by an individual, corporation, or other entity to a taxing authority like the IRS.
The form that an employer must send to an employee and the IRS at the end of the year. The W-2 form reports an employee's annual wages and the amount of taxes withheld from their paycheck.
A form completed by an employee to indicate his or her tax situation to the employer. The W-4 form tells the employer the correct amount of tax to withhold from an employee's paycheck.
A series of documents the IRS refers to as 'information returns.' There are a number of different 1099 forms that report the various types of income you may receive throughout the year other than the salary your employer pays you.