Term
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Definition
| seeking legal ways to reduce, eliminate, or defer income taxes |
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Term
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Definition
| income upon which income taxes are levied |
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Term
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| compulsory government-imposed charges levied on citizens and their property |
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Term
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Definition
| progressively increases as a taxpayer's taxable income increases |
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Term
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Definition
| rate stays the same for all income, resulting in lower-income people paying proportionately more in taxes |
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Term
| marginal tax bracket/rate |
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Definition
| 7 income-range segments at which income is taxes at increasing rates; 10%, 15%, 25%, 28%, 33%, 35%, 39.6% |
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Term
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Definition
| yearly adjustments to tax brackets that reduce inflation's effects on tax brackets |
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| effective marginal tax rate |
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Definition
| total marginal tax rate on income after including federal, state, and local income taxes as well as Social Security and Medicare taxes |
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Term
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Definition
| compensation from all sources |
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Term
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| compensation for performing personal services |
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Term
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Definition
| net income received from the sale of an asset above the costs incurred to purchase and sell it |
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Term
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Definition
| when the sale of an asset brings less income than the costs of purchasing and selling the asset |
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Term
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| profit or loss on the sale of an asset you have owned for one year or less |
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| profit or loss on the sale of an asset that has been held for more than a year |
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Term
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Definition
| all income in the form of money, goods, services, and/or property |
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Term
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Definition
| income not subject to federal taxation |
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Term
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Definition
| allowable subtractions from gross income |
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Term
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Definition
| gross income minus any exclusions and adjustments |
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Term
| above-the-line deductions |
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Definition
| adjustments subtracted from gross income whether taxpayer itemizes deductions or not |
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Term
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Definition
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Term
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| fixed amount that all taxpayers may subtract from their adjusted gross income if they do not itemize their deductions |
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Term
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| description of a taxpayer's marital status on the last day of the tax year |
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Term
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Definition
| legally permitted amount deducted from AGI based on the number of people that the taxpayer's income supports |
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Term
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Definition
| a relative or household member for whom an exemption may be claimed on one's income taxes |
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Term
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Definition
| dollar-for-dollar decrease in tax liability |
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Term
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Definition
| a tax credit that can reduce one's tax liability to zero; however, if the credit is more than tax liability, the excess is not refunded |
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Term
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Definition
| a tax credit that can reduce one's income tax liability to below zero with the excess being refunded to the taxpayer |
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Term
| American Opportunity Tax Credit |
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Definition
| partially refundable tax credit of up to $2500 a year to help defray college expenses for the first four years of postsecondary education |
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Term
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Definition
| nonrefundable tax credit that may be claimed every year for tuition and related expenses paid for all years of postsecondary education undertaken to acquire or improve job skills |
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Term
| earned income credit (EIC) |
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Definition
| refundable tax credit that may be claimed by workers with a qualifying child and in certain cases by childless workers |
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Term
| child and dependent care credit |
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Definition
| nonrefundable tax credit that may be claimed by workers who pay employment-related expenses for care of a child or other dependent if that care gives them the freedom to work, seek work, or attend school full-time |
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Term
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Definition
| amount the IRS sends back to a taxpayer if withholding and estimated payments exceed the tax liability |
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Term
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Definition
| Form 1040X, that may be filed to obtain a deserved refund or correct any tax filing mistakes on an original or previously filed return for the previous 3 years |
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Term
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Definition
| the IRS requirement that an employer withhold a certain amount from an employee's income as a prepayment of that individual's tax liability for the year; sent to the government where it is credited to the taxpayer's account |
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Term
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Definition
| people who are self-employed or receive substantial income from an employer that is not required to practice payroll withholding are required by the IRS to estimate their tax liability and pay their taxes in advance in quarterly installments |
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Term
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Definition
| deliberately and willfully hiding income from the IRS, falsely claiming deductions, or otherwise cheating the government out of taxes owed; illegal |
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Term
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Definition
| reducing tax liability through legal techniques |
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Term
| FSA debit card (Flexcard) |
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Definition
| a card used to access and spend funds from a flexible spending account |
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Term
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Definition
| an IRS regulation requiring that unspent dollars in a flexible spending account at the end of a calendar year be forfeited, unless the employer allows a 2 1/2-month grace period for spending the funds |
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Term
| defined-contribution retirement plan |
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Definition
| IRS-approved retirement plan sponsored by employers that allows employees to make pretax contributions that lower their tax liability |
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Term
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Definition
| employer programs that match employees' 401(k) contributions up to a particular percentage |
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Term
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Definition
| money on which an employee has already paid taxes |
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Term
| tax-sheltered investments |
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Definition
| a financial arrangement that results in a reduction or elimination of taxes due |
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Term
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Definition
| percentage yield on a taxable investment after subtracting the effect of federal income taxes that will need to be paid on the investment |
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Term
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Definition
| an income tax having but a single rate for all taxpayers regardless of income level and type |
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Term
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Definition
| federal retail sales tax on the estimated "value added" to a product or material at each stage of manufacture or distribution |
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Term
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Definition
| income, dividends, or capital gains that are allowed to grow without taxes until distributions are taken |
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Term
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Definition
| an individual retirement account of investments made with after-tax money; the interest on such accounts is allowed to grow tax-free, and withdrawals are also tax-free |
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Term
| individual retirement account (IRA) |
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Definition
| investment account that reduces current year income, and the funds in the account accumulate tax-free |
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Term
| Coverdell education savings account |
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Definition
| an IRS-approved way to pay the future education costs for a child younger than age 18 whereby the earnings accumulate tax-free and withdrawals for qualified expenses are tax-free |
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Term
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Definition
| investment returns in the form of rents, dividends, capital gains, interest, or royalties |
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Term
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Definition
| created when deductions generated from an investment (such as depreciation and net investment losses) exceed the income from an investment |
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