Adjusted Gross Income (AGI) – Gross income reduced by adjustments to income before exemptions and deductions are applied.
Deduction – An amount subtracted from your taxable income for certain expenses.
Dependent – A child or relative whom you support and who qualifies you to take an exemption.
Exemption – A type of deduction claimed for yourself, your spouse (if filing jointly), and each dependent.
Filing Status – A category of taxpayer. Each taxpayer must select a filing status on their tax return: Single, Head of Household, Married Filing Jointly, Married Filing Separately, or Qualifying Widow(er). Filing status determines things such as your overall tax rate, eligibility, and income limits for various credits and deductions.
Gross Income – The total amount of your income before applying adjustments, exemptions, credits, and deductions.
Head of Household – A filing status claimed by taxpayers who are single but have qualifying dependents.
IRS/Internal Revenue Service – A bureau of the Department of the Treasury and the federal government agency responsible for collecting taxes and for enforcing the tax code.
Itemized Deduction – A deduction for a specific expense that may be claimed if the total amount of all itemized deductions is greater than the standard deduction (see the definition for standard deduction).
Local Tax – A tax charged by a local government, such as a city or county.
Luxury Tax – An indirect tax attached to certain expensive, nonessential goods or services such as sports cars or jewelry.
Married Filing Jointly – A filing status claimed by married couples who opt to combine income and file a single tax return together to take advantage of various tax benefits.
Married Filing Separately – A filing status claimed by married couples who do not want to file a joint return and agree to report their income separately.
Penalty – Charges added to your tax bill for late filing and late payment. The IRS and state governments may also charge interest for late tax payments.
Property Tax – A tax paid for ownership of property, such as houses and land.
Qualifying Widow(er) – A filing status claimed by a taxpayer whose spouse has died during the tax year and entitles the taxpayer to the tax rates and benefits of a joint return. If a widow(er) has dependents and does not remarry, that person may be allowed to claim Qualifying Widow(er) status for two more years.
Refund – The amount of money you receive back from the IRS or state when you have paid more taxes than you owe.
Sales Tax – A tax on retail products, goods, and services, based on a certain percentage of the sale price and is generally set by the state and local governments.
Single – A filing status claimed by those who are unmarried, divorced, or legally separated and who do not qualify for Head of Household status.
Standard Deduction – A specific amount that differs by filing status. You may deduct this amount from your taxable income if you do not itemize deductions.
Tax Bracket – A range of incomes that determines a specified tax rate.
Tax Liability – The total amount of taxes you owe for that tax year, determined by your tax rate.
Tax Rate – The percentage of income owed as tax.
Tax Year – The 12-month period covered by a tax return.
Taxable Income – The amount of income that is taxed. The remaining sum of your Adjusted Gross Income (AGI) after all applicable exemptions, credits, and deductions have been subtracted.
Withholding – Money held back from your paycheck and used to pay a portion of your annual taxes.