Tax Glossary
Simple, clear definitions of common tax terms. No jargon, just plain language explanations to help you understand your taxes better.
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🔤All Terms (A-Z)
AGI (Adjusted Gross Income)
Your total income minus certain adjustments. A key number that affects many tax credits and deductions.
Capital Gains
Profits from selling assets like stocks or property. Taxed differently based on how long you held the asset.
Deduction (Standard & Itemized)
Reduces your taxable income. Choose between the standard deduction or itemizing specific expenses.
Dependent
A child or qualifying person you support financially. Claiming dependents can unlock tax credits and deductions.
Earned Income
Money you receive for working, including wages, salaries, tips, and self-employment income.
Earned Income Tax Credit (EITC)
A refundable tax credit for low- to moderate-income workers. Can reduce tax or increase your refund.
FICA Taxes
Mandatory payroll taxes that fund Social Security and Medicare. Paid by employees, employers, and self-employed.
Filing Status
Your tax situation based on marital status and family structure. Affects your brackets and deductions.
Gross Income
All money you receive before taxes and deductions. The starting point for calculating AGI and taxable income.
Income Tax
Tax paid on money you earn, calculated using progressive tax brackets. Includes federal and state taxes.
Marginal Tax Rate
The rate at which your next dollar of income is taxed. Represents your top tax bracket.
Medicare Tax
Payroll tax (1.45% employee + 1.45% employer) that funds health insurance for seniors and disabled individuals.
Payroll Tax
Taxes withheld from your paycheck to fund Social Security, Medicare, and income tax obligations.
Pre-Tax vs Post-Tax
Whether money is taken from your paycheck before or after taxes. Affects take-home pay and retirement savings.
Progressive Tax System
A tax system where rates increase as income increases. Higher earners pay higher rates only on income within each bracket.
Property Tax
Annual tax on real estate based on property value. Funds local schools, police, fire, and infrastructure.
Sales Tax
Tax on goods and services collected at purchase. Rates vary by state, county, and city.
Self-Employment Tax
Tax (15.3%) that self-employed workers pay to cover both employee and employer portions of Social Security and Medicare.
Social Security Tax
Payroll tax (6.2% employee + 6.2% employer) that funds retirement, disability, and survivor benefits.
Standard Deduction
Fixed amount that reduces taxable income. Most taxpayers claim this instead of itemizing deductions.
Tax Credit
Directly reduces your tax bill dollar-for-dollar. More powerful than a deduction for lowering taxes.
Tax Credit vs Tax Deduction
Credits reduce tax owed dollar-for-dollar, while deductions reduce taxable income. Credits are typically more valuable.
Tax Bracket
A range of income taxed at a specific rate. Your income is divided across multiple brackets, not all taxed at one rate.
Taxable Income
The amount of income subject to tax after deductions. Used to calculate your actual tax owed.
Withholding
Tax automatically taken from your paycheck and sent to the IRS as prepayment. Helps avoid owing a lump sum at tax time.
More Terms Coming Soon
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