A · C · D · E · F · G · H · I · M · N · O · P · Q · R · S · T · U · W
A
- Above-the-Line Deduction
- An adjustment subtracted from gross income to reach AGI. You can take these whether or not you itemize — examples include HSA contributions, the self-employed health-insurance deduction, and educator expenses.
- Additional Medicare Tax
- An extra 0.9% Medicare tax on wages and self-employment income above $200,000 (single) or $250,000 (married filing jointly), on top of the regular 1.45%.
- Adjusted Gross Income (AGI)
- Your total (gross) income minus specific above-the-line adjustments such as deductible retirement contributions, student-loan interest, and half of self-employment tax. AGI is the figure many credits and deductions phase out against.
- Alternative Minimum Tax (AMT)
- A parallel tax system with its own exemption and rates, designed to ensure high-income taxpayers with many deductions still pay a minimum amount. You pay the higher of your regular tax or the AMT.
C
- Capital Gain
- Profit from selling a capital asset (stock, crypto, property) for more than its cost basis. Taxed as short-term (ordinary rates) if held one year or less, or long-term (0/15/20%) if held longer.
- Capital Loss
- The loss when an asset sells for less than its basis. Losses offset capital gains, and up to $3,000 of net loss can offset ordinary income per year, with the rest carried forward.
- Child Tax Credit (CTC)
- A credit of up to $2,200 per qualifying child under 17 for 2026, with up to $1,700 refundable. Phases out above $200,000 / $400,000 of income.
- Cost Basis
- What you paid for an asset, including commissions and improvements. Subtracted from the sale price to determine your capital gain or loss.
- Credit for Other Dependents
- A $500 nonrefundable credit for dependents who don't qualify for the Child Tax Credit, such as older children and dependent relatives.
D
- Deduction
- An amount subtracted from income before tax is calculated, lowering the income that's taxed. Compare with a credit, which reduces tax directly.
- Dependent
- A qualifying child or relative you support and claim on your return, potentially unlocking credits and a more favorable filing status.
E
- Earned Income Tax Credit (EITC)
- A refundable credit for low- to moderate-income workers, worth up to $8,231 in 2026 for families with three or more children. The amount scales with income and number of children.
- Effective Tax Rate
- Your total tax divided by your total income — the single percentage that summarizes your overall tax burden. Always lower than your marginal rate.
- Estimated Tax
- Quarterly payments on income without withholding (self-employment, investments, rent). Required if you expect to owe $1,000 or more at filing.
- Exemption
- An amount that reduces taxable income. Personal exemptions are $0 under current law, but exemptions still exist for the AMT and estate tax.
F
- FICA
- The Federal Insurance Contributions Act payroll tax — 6.2% Social Security (up to the wage base) plus 1.45% Medicare — totaling 7.65%, matched by your employer.
- Filing Status
- Your tax category — Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Surviving Spouse — which sets your brackets and standard deduction.
- Form 1040
- The standard U.S. individual income tax return, on which you report income, deductions, credits, and compute your final tax or refund.
- Form 1099
- A family of forms reporting non-wage income — contractor pay (1099-NEC), interest (1099-INT), dividends (1099-DIV), brokerage sales (1099-B), and more.
- Form W-2
- The wage and tax statement your employer issues by January 31, reporting your taxable wages and the taxes withheld.
- Form W-4
- The form you give your employer to set how much federal income tax is withheld from your paychecks.
G
- Gross Income
- All income you receive before any deductions — wages, business profit, interest, dividends, rents, and more.
H
- Head of Household
- A filing status for unmarried taxpayers who support a qualifying dependent, offering a larger standard deduction and wider brackets than Single.
I
- Itemized Deductions
- Specific deductible expenses — mortgage interest, state and local taxes (capped), charitable gifts, large medical costs — claimed instead of the standard deduction when they total more.
M
- Marginal Tax Rate
- The rate applied to your last dollar of income — the bracket you're 'in.' Only income above each threshold is taxed at that rate.
- Modified Adjusted Gross Income (MAGI)
- AGI with certain deductions added back, used to determine eligibility for credits, IRA deductions, and the Net Investment Income Tax.
N
- Net Investment Income Tax (NIIT)
- A 3.8% surtax on investment income for taxpayers with MAGI above $200,000 (single) or $250,000 (joint).
- Nonrefundable Credit
- A credit that can reduce your tax to zero but not below — any excess is lost (though some carry forward).
O
- OBBBA
- The One Big Beautiful Bill Act (P.L. 119-21, 2025), which made the current rate structure permanent and added temporary deductions for tips, overtime, seniors, and car-loan interest.
P
- Pre-Tax Deduction
- An amount removed from pay before income tax is calculated — traditional 401(k), health premiums, HSA — lowering taxable wages.
- Progressive Tax
- A tax where higher income is taxed at higher rates, achieved through marginal brackets, so the wealthy pay a larger share of each additional dollar.
Q
- Qualified Business Income (QBI) Deduction
- A deduction of up to 20% of qualified pass-through or self-employment income, subject to income-based limits.
- Qualified Dividend
- A dividend taxed at the lower long-term capital gains rates rather than ordinary rates, if holding-period requirements are met.
R
- Refundable Credit
- A credit that can produce a refund even if it exceeds your tax — examples include the EITC and part of the Child Tax Credit.
- Revenue Procedure
- An official IRS publication; the annual 'Rev. Proc.' sets inflation-adjusted brackets, deductions, and limits for the coming tax year.
- Roth Account
- A retirement account funded with after-tax dollars; qualified withdrawals, including growth, are tax-free.
S
- Schedule C
- The form sole proprietors and single-member LLCs use to report business income and expenses, producing the net profit that flows to Schedule SE and the 1040.
- Schedule SE
- The form used to calculate self-employment tax on net business earnings.
- Self-Employment Tax
- The 15.3% Social Security and Medicare tax paid by the self-employed, who cover both the employee and employer halves.
- Social Security Wage Base
- The maximum earnings subject to the 6.2% Social Security tax each year — $184,500 for 2026. Earnings above it are not subject to Social Security tax.
- Standard Deduction
- A flat deduction based on filing status ($16,100 single / $32,200 joint for 2026) claimed instead of itemizing.
T
- Tax Bracket
- An income range taxed at a specific marginal rate; the U.S. has seven, from 10% to 37%.
- Tax Credit
- A dollar-for-dollar reduction of tax owed, more valuable than a deduction of the same size.
- Tax-Loss Harvesting
- Selling investments at a loss to offset capital gains and reduce tax, subject to the wash-sale rule.
- Taxable Income
- The income actually taxed — AGI minus the standard or itemized deduction and the QBI deduction.
- Traditional Account
- A retirement account funded with pre-tax dollars; contributions are deductible now and withdrawals are taxed later.
U
- Underpayment Penalty
- A charge, effectively interest, for not paying enough tax during the year through withholding or estimated payments.
W
- Wage Base
- The income ceiling to which a specific tax applies — most commonly the Social Security wage base.
- Wash-Sale Rule
- A rule disallowing a capital loss if you buy the same or a substantially identical security within 30 days before or after the sale.
- Withholding
- Tax your employer removes from each paycheck and remits to the IRS on your behalf, based on your W-4.