Tax Center

An abatement is a reduction in a tax rate or tax liability.
Ability-to-pay taxation is a tax that's assessed based on the taxpayer's ability to pay the tax.
An above-the-line deduction is a tax deduction that reduces adjusted gross income.  
An abusive tax shelter is an investment strategy that illegally shields assets from tax liability.  
An ad valorem tax is a property tax levied based on the value of the property in question.
Adjusted cost base (ACB) is an income tax term that refers to an adjustment in an asset's book value resulting from the cost of improvements, payouts, and similar improvements or dispositions.
Adjusted gross income (AGI) is the figure used by the Internal Revenue Service to determine a taxpayer's eligibility for certain tax benefits.
The alternative minimum tax (AMT) is income tax owed using a parallel tax code designed to ensure that every taxpayer, particularly rich ones and corporations, pay at least some income tax each year.
An amended return is a Form 1040X filed by a taxpayer to correct mistakes made on a Form 1040, Form 1040A, Form 1040EX, Form 1040NR or Form 1040NR-EZ (U.S. Individual Income Tax Return) filed in the
/*-->*/ Antitrust refers to federal laws disallowing companies from monopolizing markets, engaging in price discrimination or price fixing, or otherwise restraining free trade.
Back taxes are state, federal, or local taxes that are past due.
Backup withholding is a way for the Internal Revenue Service to withhold taxes from a taxpayer who does not provide or have a taxpayer identification number or Social Security number.
Basis refers to the original price of an asset. It is sometimes called cost basis or tax basis.
In the tax world, bracket creep occurs when inflation drives income up and into higher tax brackets.
  The Buffett Rule is a tax rule change included in President Barack Obama's 2013 budget proposal. If implemented, the rule would ensure that individuals who earn more than one million dollars per year
A capital gains tax is a tax on the increase in the value of an investment.
Capital gains treatment refers to whether capital gains are taxed as short-term capital gains, long-term capital gains, or in another manner.
The child tax credit is a tax-bill reduction given to people with qualifying children under 17 years old.
Cost basis refers to the original price of an asset. Cost basis is sometimes called tax basis.
In the finance world, deductible is usually short for tax-deductible, which refers to an expense that reduces the amount of income that is subject to tax. In the insurance world, a deductible is a
A deduction is a reduction in taxable income, which thereby lowers the amount of taxes owed. Federal, state, and local tax codes determine what kinds of items or expenses are deductible and which
Deferred income tax refers to a portion of income earned by a company during a given year for which the associated income tax has not yet been paid.
A dependent relies on someone else for most or all of his or her financial support.  
A direct tax is any tax levied on companies or individuals that cannot be transferred to another party. It is the opposite of indirect tax.
The dividend tax credit generally refers to a Canadian tax program whereby Canadian residents receive a reduction in taxes owed on dividends received from Canadian corporations.
Double taxation occurs when a tax is imposed more than once on the same asset, income stream, or transaction.
In the tax and import/export world, a duty (or customs duty) is money collected under a tariff.  
Earned income is an IRS term for income that is obtained by participating in a business or trade. Earned income typically includes salaries and bonuses, wages, commissions and tips. Union strike benefits
The earned income tax credit (EIC) is a tax credit for low-income workers. 
An education credit is a tax credit associated with the payment of education expenses during the tax year.
The educator expenses deduction is an IRS deduction that allows teachers to exclude out-of-pocket teaching expenses from income.
The effective tax rate is the average rate at which an individual is taxed on earned income, or the average rate at which a corporation is taxed on pre-tax profits.
Electronic filing, or e-File, is the online tax return filing system developed by the Internal Revenue Service (IRS)
An employer identification number (EIN) is a number assigned to businesses by the IRS. It is also known as the Federal Employer Identification Number (FEIN) or the Federal Tax Identification Number.
An enrolled agent (EA) is person who is authorized to represent a taxpayer before the Internal Revenue Service (IRS).
An estate tax is levied on assets inherited by the heirs to a deceased person's estate. 
Excise tax refers to an indirect type of taxation imposed on the manufacture, sale or use of certain types of goods and products.
Federal income tax is a tax on a range of certain kinds of income. Taxpayers generally calculate and pay federal income tax by filing an IRS Form 1040 by April 15 of each year.
A federal tax bracket is range of incomes for which a certain federal income tax rate applies.
A flat tax is a system under which all taxpayers pay taxes at the same percentage rate of their total income.
Mistakes happen, and the IRS understands that (though the jury is still out regarding how forgiving the IRS is about mistakes). For this reason, the IRS provides the Form 1040X, which requires a line-by-
Taxpayers must file a Form 1045 within one year after the end of the year in which the loss or unused credit occurred, and they will likely also have to file amended returns. It is important to note that
Form 1065 is part of IRS Schedule K-1. You may have heard of the K-1 -- it is the form that reports income from a partnership and is sent to the partners so they can include that income on their personal
Mortgage lenders must supply borrowers with Form 1098 every year. The amount of mortgage interest on this form is important, because in most cases it lowers the taxpayer's tax liability. If the borrower
Form 1099-B is useful for reporting and calculating taxes that apply to capital gains. For instance, the form will disclose the proceeds of the sale and how much of those proceeds are capital gains, as
Financial institutions must create Form 1099-DIV for dividends and distributions of at least $10 in a tax year. Taxable dividend distributions from life insurance contracts and employee stock ownership
Interest is taxable income. The Form 1099-INT shows how much interest a person earned from an institution in a tax year. The IRS requires brokerage firms, banks, mutual funds and other financial
According to the IRS, a Form 1099-Misc is appropriate for reporting the following: Payments of $600 or more for services performed for a trade or business by people not treated as its employees (such as
A gambling loss is any money lost in lottery tickets, slot machines, table games (craps, poker, blackjack, etc.), bingo games, racing bets and keno.
The purpose of the gas guzzler tax is to discourage the manufacture of inefficient cars. The sticker on a new car should disclose the amount of gas guzzler tax that a manufacturer has paid on a car.
A gift tax is a federal tax on anything of value that one person gives to another.
A goods and services tax (GST) is simply a tax on goods and services for domestic consumption. This tax system is in place in about 160 countries, including Canada, India, Vietnam, Australia, United
Head of household is a formal IRS filing status for people who are single but provide financial support to at least one other person in his or her home.  
Highly compensated employees are usually limited in the amount of money they can set aside in their 401(k) plans and other retirement plans. Specifically, the federal government limits the amount of money
Home office expenses are those costs incurred by working from a home-based office.  These expenses are tax-deductible.
Imputed Interest refers to interest that is considered by the IRS to have been paid for tax purposes, even if no interest payment was made. The IRS uses imputed interest as a tool to collect tax revenues
Income tax refers to taxes imposed by the government on individuals and businesses based on annual income. In the US, income tax is collected on taxable income by the Internal Revenue Service (IRS).
The Internal Revenue Service (IRS) is a bureau of the Department of Treasury that is tasked with the enforcement of income tax laws and oversees the collection of federal income taxes. In addition, it is
The IRS Form 1099 is used to report a variety of unique income payments to the IRS. This form is usually used when the taxpayer has received income from other sources besides a wage-paying job.
An itemized deduction is a reduction in taxable income that is dependent on calculations specific to the taxpayer's expenses or situation. Federal, state and local tax codes determine what is deductible
A joint return is a tax return filed by two people based on their marital status at the end of the year or at the time of death of either one of the individuals.
The joint return test is used by the IRS to determine whether or not a taxpayer may be validly claimed as a dependent by another taxpayer. This test also determines whether or not a married taxpayer may
Kiddie tax is the colloquial term for certain taxes owed on interest, dividends or other investment income earned by children under 17 years old.
A like-kind exchange, also called a Section 1031 exchange, is a real estate transaction in which the buyer and seller effectively swap properties in order to avoid paying capital gains tax on the sale.
A long-term capital gain or loss is the profit or loss on the sale of an investment that has been held for longer than a certain IRS-defined period of time.  
A loophole is an exception that allows a system to be circumvented or avoided.  It usually refers to legal, taxation, or security strategies that are exploited for personal gain.
The term "loss carryback" is where a company retroactively chooses to apply the net operating loss in the current year to the previous profitable year(s) to obtain a tax refund for monies already remitted
The term "loss carryforward" refers to an accounting practice whereby companies utilize their current year's net operating loss against future year's net operating profit to reduce the taxes owed in those
Marginal tax rate is the rate at which an additional dollar of taxable income would be taxed. It is part of a progressive tax system, which applies different tax rates to different levels of income. As
The marital deduction refers to the deduction the IRS allows for a taxpayer to transfer some or all of his assets tax free to his spouse prior to the calculation of estate tax owed by his estate.
The marriage penalty refers to the increased tax burden a married couple bears when they file a joint tax return versus filing two separate tax returns.
The marriage tax refers to the higher taxes a couple pays when they file a joint tax return versus the amount a couple pays when filing two separate tax returns.
Deciding to file jointly or separately is a personal decision for couples, and deciding which one is optimal depends on the couple's income and deductions. It is important to note that from a legal
The term mileage allowance refers to a variety of travel allowances allowed by the IRS at a specific rate per mile traveled while on business or for other purposes recognized by the IRS.
Mortgage credit certificates (MCC) are issued by state or local governments and allow some taxpayers to receive a tax credit for the interest paid on a mortgage.
A mortgage interest deduction allows mortgage borrowers to reduce their income tax liability by listing the amount of mortgage interest paid as an itemized deduction.
A nanny tax is a colloquial term for the Social Security, Medicare and federal unemployment taxes due on the pay to caregivers.
Negative income tax refers to transfer payments given to families whose reported household income fall below a predetermined amount and qualifies them for a supplemental payment from the government.
Net of tax simply means that the number in question is the amount left over after taxes.
In economics, net taxes are taxes on production less subsidies received. Alternatively, net taxes are taxes paid to the government less transfer payments.
A notice of seizure is a bad thing. During this time, the IRS takes physical custody of the taxpayer's assets, which could range from cash accounts to homes, cars and other assets.
An offer in compromise is an arrangement between a taxpayer and a taxing authority, whereby the taxing authority agrees to let a taxpayer settle a tax debt for less than the full amount.
An office audit is a type of audit by the IRS.
In the tax world, a parsonage allowance is income earned by members of the clergy but excluded from gross income.
A progressive tax is one in which the tax rate increases as the amount being taxed increases. Most western countries use a progressive tax in one way or another.
Qualified adoption expenses (QAEs) are costs associated with adopting a child. They are generally tax-deductible and may even qualify for a tax credit.
A qualified appraisal is a document that formally describes and estimates the value of a piece of property.
A qualified appraiser is a person authorized to produce a qualified appraisal. 
A qualified charitable organization is a charity to which donations are tax-deductible.
A qualified electric vehicle is powered by an electric motor that relies on rechargeable batteries or fuel cells.
Generally, a qualified higher education expense is tuition or a tuition-related expense paid to a post-secondary institution.
Qualified production activities income (QPAI) is certain income related to manufacturing that qualifies to be taxed at a lower rate.
Qualified widow (or widower) is a tax-filing status similar to filing single, married filing jointly, married filing separately, or head of household.
Realized gains are increases in the value of an asset that has been sold. This concept is the opposite of paper profit -- a paper profit only turns into a realized gain when you actually sell the security
A realized loss is a decrease in the value of an asset that has been sold. This concept is the opposite of paper loss or unrealized loss -- a paper loss only turns into a realized loss when you actually
Refund can refer to the amount that the Internal Revenue Service will pay to a taxpayer based an overpayment of estimated tax or employer withholding taxes during the year.  A refund also refers to the
A regressive tax is a tax that increases as a percentage of income as the amount of income declines.
Sales tax is a consumption tax levied on goods and services purchased at the retail level, paid by the consumer and submitted by the retailer to the governing tax authority.
The same property rule is an IRS rule stating that money taken from an Individual Retirement Account must be placed into a similar type of account if the account holder is less than 59.5 years old.
The saver's tax credit, also called the savers credit, is a tax credit for making contributions to certain retirement accounts.  
/*-->*/ An Internal Revenue Service (IRS) Schedule K-1 is used to report a beneficiary's share of income, deductions, credits, and other items from pass-through entities. These generally include
The self-employment tax refers to the Social Security and Medicare taxes paid on income earned by people who work for themselves.
Short-term gain usually refers to the profit on the sale of an investment that has been held less than a certain IRS-defined period of time.
Social Security tax is an employment tax that funds the Social Security program, a mandatory U.S. government program of retirement, disability, and life insurance. This tax pays for the benefits provided
A standard deduction is a reduction in taxable income. Federal, state and local tax codes determine what is deductible and which taxpayers are eligible for deductions.
A step-up in basis refers to an increase in the price at which an investment is considered to have been purchased.
A stock savings plan is a Canadian taxation system that offers tax benefits to Canadian residents who purchase the initial public offerings (IPOs) of local companies.
A tariff is a tax on imports or exports. Money collected under a tariff is called a duty or customs duty. Tariffs are used by governments to generate revenue or to protect domestic industries from
A tax advisor is a person who advises clients about tax laws and strategies.
Used primarily in the United Kingdom, a tax and price index measures the amount that a consumer’s income would have to increase to compensate for increases in inflation and taxes.
A tax anticipation note (TAN) is a short-term note that a state or local government issues and expects to repay with imminent tax receipts.
Tax arbitrage is the act of profiting from differences in how income or capital gains are taxed.
A tax attribute is a reduction that the IRS requires a taxpayer to make in a tax credit or tax loss when a lender cancels debt that the taxpayer owes. There are typically seven types of tax attributes:
Tax avoidance is the legal act of minimizing one's taxes. It is not the same as tax evasion, which is illegal.
A tax base is the total amount of assets or revenue that a government can tax.
A tax benefit is any tax advantage given by the IRS to a taxpayer that reduces his or her tax burden. It's also the name of an IRS rule requiring companies to pay taxes on income that was previously
A tax break is a tax deduction, tax credit or reduction in tax rate.
In a tax clawback agreement, a company or organization agrees to repay government benefits via higher taxes at a later date.
A tax credit is permission to reduce the amount of income that is subject to tax. A tax credit is not the same as a tax deduction.  
A tax deduction reduces the amount of income that is subject to tax. A tax deduction is not the same as a tax credit.
In the investment world, "tax deferred" refers to investments on which applicable taxes (typically income taxes and capital gains taxes) are paid at a future date instead of in the period in which they
The tax differential view of dividend policy is the idea that capital gains are better than dividends because the tax rate on capital gains is lower than the tax rate on dividends.
Tax drag is the reduction in returns attributable to taxes.
Tax efficiency involves making investing choices that reduce one's tax bill.
The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) became law on September 3, 1982. The TEFRA made it more difficult for individuals and corporations to reduce their tax liability.
Tax fairness is the concept of having an equitable tax system.
Tax free means not taxable.
Tax gain/loss harvesting is a strategy for reducing taxes.
A tax haven is a country or jurisdiction known for generating little or no tax liability.
A tax holiday is a day or period of time during which a government does not tax certain transactions.
A tax home is a taypayer's primary residence or place of business (if the taxpayer is an organization).
The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) was signed into law on May 17, 2006.
Tax indexing is method for adjusting tax rates to account for inflation-related increases in income.
Tax liability refers to the amount legally owed to a taxing authority as the result of a taxable event.
A tax lien is a claim placed on a piece of real estate by a tax authority due to a taxpayer's failure to pay taxes.   
A tax loss carryforward is a "negative profit" for tax purposes. It usually occurs when a company's expenses exceed revenues, making the company unprofitable.
Tax lot accounting is a method of record keeping that tracks the cost, purchase date, and sale date for every unit of every security in a portfolio.
Tax planning is the process of forecasting one's tax liability and formulating ways to reduce it.
A tax preference item is income that subjects a taxpayer to alternative minimum tax (AMT). These items are treated differently for regular tax and AMT purposes.
A tax rate is the percentage of income a person or company pays in taxes.
A taxpayer gets a tax refund when he or she has overpaid taxes to the government.
Tax relief is a tax deduction, tax credit, reduction in tax rate or forgiveness of a tax lien.
A tax return is a set of forms that a taxpayer uses to calculate and report taxes owed to the Internal Revenue Service (IRS).
Tax season is from January 1 to April 15 of each year.
A tax shelter is a means of minimizing one's tax liability. Tax shelters can be both legal and illegal.
A tax shield is a deduction, credit or other method used to reduce the amount of taxes owed.
A tax swap is a strategy that involves selling one investment with capital losses and replacing it with a similar, but not identical, investment.
A tax table shows the tax due for different income ranges.
A tax wedge is the difference between gross income and after-tax income. In economics, it refers to the broader financial effects of a tax on a sector of the market. Technically speaking, the tax wedge is
A tax year is the year for which a tax is calculated and paid.
Tax-advantaged means that some or all of an investor's income is sheltered from taxation, allowing a taxpayer to minimize his or her tax burden.
Tax-exempt commercial paper is short-term debt for which the interest payments are tax-exempt at the federal, state or local level.
Tax-exempt interest is interest income that is exempt from federal and/or state taxes.
Generally, tax-exempt securities are those whose interest, dividends or gains are free from federal income taxation.
A tax-free spinoff occurs when a company divests a portion of its business in a manner that qualifies as a tax-free transaction under Section 355 of the Internal Revenue Code and thus does not require the
A taxable estate is the portion of a person's net assets that are taxable upon his or her death.
A taxable event is any occurrence that creates a tax liability.
A taxable gain is an increase in the value of an investment. It is the difference between the purchase price (known as the "cost basis") and the sale price of an asset. 
Taxable income is any type of compensation that triggers a tax liability.
Taxable preferred securities are typically preferred stocks whose dividends are not tax-exempt.
A taxable wage base is the maximum annual wage on which a taxpayer must pay taxes.
Taxes are required payments from citizens to governments. The payments fund projects and expenditures that serve the public interest. 
A taxpayer is a person or organization that must pay taxes to a federal, state, or local agency. 
The Taxpayer Advocate Service (TAS) is an organization within the Internal Revenue Service that is designed to help taxpayers resolve problems with the IRS. 
The Taxpayer Bill of Rights is a list of the protections available to all taxpayers when dealing with the Internal Revenue Service.
Also called an Individual Taxpayer Identification Number (ITIN), a taxpayer identification number (TIN) is a nine-digit number that the IRS uses to identify individuals who do not have and are not
Tele Tax is an automated phone service offered by the IRS.
A transfer tax is a tax on the value of goods that one party gives to another.
Unearned income is an IRS term for income that is not obtained by participating in a business or trade (e.g., salaries and bonuses, wages, commissions and tips). It typically includes interest, dividends
Unrelated business taxable income (UBTI) is the tax placed on the income derived from unrelated business activities of an otherwise tax-exempt entity.
A value added tax (VAT) is a consumption tax added to a product's sales price. It represents a tax on the "value added" to the product throughout its production process. 
Vertical equity is the concept of increasing tax rates on higher incomes. Vertical equity is similar to the concept of progressive taxes.
A W-2 form is a tax form required from employers that reports wages paid and taxes withheld to the Internal Revenue Service (IRS), local state tax authorities and the Social Security Administration.
A W-4 form is a standard IRS form an employee uses to report federal taxability status to an employer.
The W-8 form is a standard IRS form that exempts non-U.S. citizens from specific federal income taxes.
The W-9 form is a standard IRS form that certifies an individual's Social Security number and taxpayer identification number.
A wealth tax is based on a person's net worth or the value of his or her assets.
Withholding tax, also sometimes referred to as simply "withholding," is an amount that employers withhold from an employee's paycheck and remit to local and federal taxing authorities on behalf of the
Zero-rated goods are goods that aren't subject to value-added (VAT) tax.