Reference

Glossary

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Adjusted gross income (AGI): Total income minus specific adjustments; many credits and deductions are measured against this number.
Adjustment to income: A deduction taken before AGI, such as student loan interest or a traditional IRA contribution, available without itemizing.
Capital gain: Profit from selling an asset for more than you paid, taxed under its own rate rules when held long term.
Deduction: An amount subtracted from income before tax is calculated, worth your marginal rate in tax savings.
Direct deposit: Electronic payment of a refund straight into a bank account, normally the fastest method.
Dual tax status: A minister's treatment as an employee for income tax and self-employed for Social Security.
Earned income: Money received for work, including wages, tips, commissions, and self-employment profit.
Effective rate: Total tax divided by total income; always lower than the marginal rate in a progressive system.
Exclusion: An item of value the law keeps out of taxable income, such as a gift or an inheritance.
Fair market value: What something would sell for between a willing buyer and seller, used to value non-cash income.
FICA: Social Security and Medicare tax withheld from nearly every paycheck, separate from income tax.
Filing status: The category — single, married filing jointly, head of household, and others — that sets bracket and standard deduction amounts.
Form W-4: The form given to an employer that tells them how much income tax to withhold from each paycheck.
Gross pay: Total earnings for a pay period before any tax or other amounts are removed.
Housing allowance: Pay designated in advance for a minister's housing and excluded from income tax.
Itemized deduction: A specific deductible expense such as mortgage interest or a charitable gift, claimed instead of the standard deduction.
Marginal rate: The rate applied to your next dollar of income; it sets what a deduction is worth.
Net pay: The amount actually received after withholding and other payroll deductions.
Nonrefundable credit: A credit that can reduce tax to zero but cannot create a refund by itself.
Over-withholding: Paying in more during the year than the tax owed, which produces a refund at filing.
Phase-out: The income range over which a credit or deduction gradually shrinks to nothing.
Progressive tax: A system where income is divided into bands and each higher band carries a higher rate.
Recordkeeping: Keeping the documents that support income and deductions, normally at least three years.
Refund: Money returned when withholding plus refundable credits exceeds the tax owed.
Refundable credit: A credit that can be paid out even when it exceeds the tax owed.
Self-employment tax: Social Security and Medicare tax paid by people working for themselves, covering both the employee and employer halves.
Standard deduction: A flat amount set by filing status that most taxpayers subtract instead of itemizing.
Substantiation: The receipts, logs, and statements that prove a deduction or credit if it is ever questioned.
Tax credit: An amount that reduces the tax bill itself, dollar for dollar.
Taxable income: The amount left after deductions, and the figure the tax rate schedule is applied to.
Unearned income: Income produced by money rather than work, such as interest, dividends, or capital gains.
Withholding: Tax an employer removes from each paycheck and sends in on your behalf.