Taxes Terms

The 0% capital gains bracket lets taxpayers whose taxable income falls below a set threshold pay no federal tax at all on long-term capital gains — a planning window for realizing gains in low-income years.

A 529 non-qualified withdrawal is money taken from a 529 plan for something other than eligible education costs, which generally triggers income tax and a penalty on the earnings portion.

A 1035 exchange lets you swap one life insurance policy or annuity for another without triggering income tax on the gains.

An above-the-line deduction is subtracted in arriving at adjusted gross income, so you can claim it whether or not you itemize — examples include certain retirement contributions and HSA contributions.

The ACA subsidy cliff refers to the point where earning above a certain income threshold can abruptly end eligibility for Marketplace premium subsidies, sharply raising your cost.

Accrual method accounting records income when it is earned and expenses when they are incurred, regardless of when cash changes hands — required for some larger businesses and standard in formal financial statements.

The Additional Medicare Tax is a 0.9% surtax on wages and self-employment income above high-income thresholds, paid only by the employee with no employer match.

The adoption tax credit offsets qualified adoption expenses such as agency fees, court costs, and travel, up to an annually adjusted limit — and under recent law a portion of it is refundable.

An airdrop is a distribution of free cryptocurrency tokens to many wallets, often to promote a new project; the tokens received are generally treated as taxable income.

An option to value a deceased person's estate six months after death instead of on the death date, which can lower estate tax if asset values fell.

The alternative minimum tax (AMT) is a parallel tax calculation that limits certain deductions and preferences to ensure higher-income taxpayers pay at least a minimum amount — you pay whichever result is higher, regular tax or AMT.

An amended return is a corrected tax return filed after the original to fix errors or claim missed deductions or credits — for individuals, it's filed on Form 1040-X.

An American depositary receipt, or ADR, is a certificate traded on U.S. exchanges that represents shares of a foreign company, letting Americans invest in it in dollars.

A way of figuring estimated tax payments that matches them to when income was actually earned, helpful for people with uneven or seasonal income.

The applicable federal rate is a minimum interest rate the IRS publishes each month that family and other private loans must generally charge to avoid unwanted tax consequences.

Average cost basis is a method that divides the total amount you paid for a fund by your total number of shares to set one uniform cost per share, commonly used for mutual funds.

Backup withholding is a flat tax that payers must take out of interest, dividends, or contractor payments when the recipient fails to provide a valid taxpayer identification number or has underreported income.

The bargain element is the difference between the market value of a stock at exercise and the lower price you paid for it under an option — an amount that often has tax consequences.

The resetting of an inherited asset's cost basis to its value on the date of death, which can shrink or erase capital gains tax for the heir.

Basis consistency rules require that the value an heir uses for an inherited asset match the value reported on the estate's tax return.

A below-the-line deduction is subtracted after adjusted gross income is calculated — the standard deduction or your itemized deductions — reducing taxable income but not AGI itself.

A trust structured so a beneficiary, rather than the grantor, is treated as its owner for income-tax purposes.

A benefits cliff is when a small rise in income makes someone lose government benefits worth more than the raise, leaving them financially worse off.

The bona fide residence test is one way to qualify for the foreign earned income exclusion by showing you are a genuine resident of a foreign country for an entire tax year.

A bond premium is the amount by which a bond's price exceeds its face value, which happens when its interest rate is higher than current market rates.

Bonus depreciation is an accelerated write-off that lets businesses deduct most or all of the cost of qualifying equipment and property in the year it's placed in service, instead of spreading the deduction over many years.

The way employers withhold income tax from bonus pay, often at a flat supplemental rate that can differ from the tax ultimately owed on that money.

Bracket creep is when inflation-driven pay raises push income into higher tax brackets without any gain in real purchasing power — the reason the IRS adjusts tax brackets for inflation each year.

Charitable bunching is a strategy of combining several years of donations into a single year so the total is large enough to itemize and exceed the standard deduction.

Bunching deductions is the strategy of concentrating several years' worth of deductible expenses — most often charitable gifts — into a single tax year so the total clears the standard deduction and itemizing pays off.

Deductible business expenses are the ordinary and necessary costs of running a business — such as supplies, rent, and software — that can be subtracted from business income to lower the tax owed.

A bypass trust lets a married couple preserve both spouses' estate-tax exemptions by holding the first spouse's assets for the survivor while keeping them out of the survivor's taxable estate.

A C corporation is a business structure that is taxed as its own legal entity, meaning profits are taxed at the corporate level and again when paid to shareholders as dividends — the classic double taxation.

A cafeteria plan is an employer benefit program that lets employees choose among options and pay for certain benefits with pre-tax dollars, lowering their taxable income.

A capital gain is the profit you make when you sell an investment or other asset for more than you paid for it, generally taxable in the year you sell.

A capital gains distribution is a payment a mutual fund makes to shareholders when it sells holdings at a profit, taxable to you in a taxable account even if you reinvest it and never sold your own shares.

A capital improvement is a permanent upgrade that adds value to a property or extends its life, and its cost can often be added to your tax basis to reduce taxable gain when you sell.

A capital loss is the loss you realize when you sell an investment for less than you paid, which can offset capital gains and a limited amount of ordinary income for tax purposes.

A capital loss carryover is the unused portion of investment losses that exceeds what you can deduct this year, carried forward to offset gains and income in future tax years.

Carried interest is the share of a fund's profits that its managers keep as compensation, often taxed as capital gains.

Carryover basis means the recipient of a gift takes over the giver's original tax basis, so the built-in gain follows the asset — unlike inherited assets, which generally get a stepped-up basis at death.

A Form 1099-K is a tax form that reports payments you received for goods and services through payment apps and online platforms, covering business or sales income rather than personal transfers like splitting a bill.

Cash method accounting records income when money is actually received and expenses when they are paid — the simple approach most individuals and many small businesses use for taxes.

The charitable contribution deduction lets taxpayers deduct donations of money or property to qualified charities, subject to income-based limits and recordkeeping rules.

Charitable deduction limits are the IRS caps on how much of your income you can deduct for donations in a single year, which depend on the type of gift and the type of charity.

A tax strategy of concentrating several years of charitable giving into a single year, often to clear the standard deduction and itemize.

Citizenship-based taxation is the US system of taxing citizens on their worldwide income regardless of where they live, which is unusual among countries.

The clean vehicle tax credit was a federal credit for buying qualifying new or used electric and fuel-cell vehicles — Congress ended it for vehicles acquired after September 2025 under the One Big Beautiful Bill Act.

A tax cliff is an income threshold where crossing it by even one dollar triggers a sudden loss of a benefit or a jump in tax — unlike a phase-out, there is no gradual transition.

Collectibles investing is buying physical items like coins, cards, or memorabilia hoping they gain value; gains on collectibles are taxed at a higher rate than most investments.

Commission income is pay based on results, such as a percentage of sales you close, so your earnings rise and fall with your performance rather than staying fixed.

A trust some states let married couples use so assets count as community property, which can deliver a favorable tax basis step-up at the first spouse's death.

Commuter benefits are an employer program that lets employees set aside pre-tax income to pay for qualifying transit or parking costs, reducing their taxes on commuting expenses.

A combined year-end tax form from a brokerage that gathers several 1099 types — such as dividends, interest, and sale proceeds — into one document.

Constructive receipt is the tax rule that income counts as received the moment you have unrestricted access to it — a December paycheck you leave uncashed until January is still taxed in December.

A tax rule used by a few states that taxes a remote worker's income as if earned at the employer's location unless the remote work is genuinely required by the employer.

A revised 1099 tax form issued when the original held errors, often arriving after brokerages finalize reclassified income.

Cost segregation is a study that breaks a building's purchase price into components that can be depreciated faster than the structure itself, front-loading tax deductions for rental and commercial property owners.

A covered expatriate is someone giving up US citizenship or long-term residency who meets certain income, net worth, or compliance criteria and is therefore subject to the exit tax.

Crowdfunding donations are contributions raised from many people online, often through platforms like GoFundMe, to support a person or cause.

A written notice to a trust beneficiary granting a temporary right to withdraw a gift, which lets that gift qualify for the annual gift-tax exclusion.

A Crummey power gives a trust beneficiary a short window to withdraw a gift, which qualifies the gift for the annual gift-tax exclusion.

Crypto cost basis is the original amount you paid for a cryptocurrency, including fees, used to calculate the taxable gain or loss when you later sell or trade it.

Crypto mining is using computer power to validate blockchain transactions and create new coins, with the miner earning newly issued cryptocurrency as a reward.

Crypto tax-loss harvesting is selling cryptocurrency that has dropped in value to realize a loss that can offset other gains, potentially lowering your tax bill.

A foreign transaction fee is a charge some banks and credit cards add when you make a purchase in a foreign currency or through a foreign bank, usually a small percentage of the amount.

Currency devaluation is a drop in a currency's value against others, which makes a country's imports pricier and its exports cheaper.

Currency exchange is the process of converting money from one country's currency into another's, usually at a rate that includes a fee or markup.

A fund that invests in foreign assets while using contracts to offset exchange-rate movements, aiming to isolate the underlying return from currency swings.

Currency risk is the chance that exchange rate movements reduce the value of your foreign investments when translated back into your home currency.

The de minimis tax rule determines whether the discount on a bond bought below face value is taxed as ordinary income rather than as a capital gain, based on how small the discount is.

The last individual income tax return filed for someone who has died, covering income from the start of the year through the date of death.

Depreciation is the tax mechanism for deducting the cost of a long-lived business or rental asset gradually over its useful life rather than all at once when purchased.

Depreciation recapture is the tax owed on the depreciation deductions previously taken on a property when it is sold, charged at its own maximum rate rather than at the ordinary long-term capital gains rate.

Digital nomad finances covers the money and tax matters of people who work remotely while traveling or living in different countries, such as banking, taxes, and health coverage.

A digital nomad visa is a permit some countries offer that lets remote workers legally live there for an extended period while earning income from abroad.

IRS Direct File is a free government-run tool for preparing and filing a federal tax return directly with the IRS, without commercial software or a paid preparer.

Direct indexing is a strategy of owning the individual stocks that make up an index rather than an index fund, enabling personalized exclusions and stock-level tax-loss harvesting.

A qualified disclaimer is a formal refusal to accept an inheritance, allowing the assets to pass to the next beneficiary as if you had died first.

A disqualifying disposition is a sale of shares from incentive stock options or an employee stock purchase plan before the required holding periods are met, causing part of the gain to be taxed as ordinary income.

Tax domicile is the place a person considers their permanent legal home, which often decides where they owe state and estate taxes even while living elsewhere.

A tax benefit in community property states where both halves of a couple's jointly owned asset get a fresh cost basis when one spouse dies.

Dual-citizenship taxes are the tax obligations of someone who is a citizen of two countries, which can mean filing and potentially owing tax in both.

A dynasty trust is designed to pass wealth down through multiple generations while minimizing estate and transfer taxes at each generation.

The Education Savings Bond Program lets eligible taxpayers exclude interest on certain U.S. savings bonds from income when the money pays for qualified education expenses, subject to income limits.

The educator expense deduction lets eligible teachers and school staff deduct out-of-pocket spending on classroom supplies, up to an annual limit, without itemizing.

An ESPP discount is the reduced price at which an employee stock purchase plan lets you buy company shares, commonly a set percentage below the market value, which can make the plan a valuable benefit.

An estate-planning technique that locks in an asset's current value for tax purposes so future growth passes to heirs outside the taxable estate.

The federal estate tax return, filed for estates above the exemption or to transfer certain unused tax benefits to a surviving spouse.

Relief from the penalty for underpaying estimated taxes, which the IRS may grant in certain situations such as disaster, disability, or a first year of retirement.

The safe harbor rule lets you avoid an underpayment penalty by prepaying at least a set benchmark of tax during the year — generally tied to this year's bill or last year's — even if you end up owing more at filing.

An exchange rate is the price of one country's currency expressed in another's, determining how much foreign money you receive when you convert.

An excise tax is a tax on a specific product or activity — such as fuel, tobacco, or airline tickets — often built into the price, and the tax code also uses the label for penalty taxes like those on improper retirement account transactions.

The exclusion ratio is the formula that determines what portion of each nonqualified annuity payment counts as a tax-free return of your original investment versus taxable earnings.

An expatriate is a person who lives outside their home country, which can create special tax and financial planning considerations.

The exit tax, or expatriation tax, is a tax that certain higher-net-worth people may owe on their unrealized gains when they give up US citizenship or long-term residency.

The failure-to-file penalty is the charge for not submitting a tax return by the deadline, calculated as a percentage of the unpaid tax for each month the return is late — far steeper than the penalty for filing on time but paying late.

The failure-to-pay penalty is a monthly charge on tax that remains unpaid after the deadline — much smaller than the failure-to-file penalty, which is why filing on time matters even when you cannot pay in full.

FATCA, the Foreign Account Tax Compliance Act, is a US law that requires foreign financial institutions and US taxpayers to report certain foreign-held assets to the IRS.

FICA (the Federal Insurance Contributions Act) is the law behind the Social Security and Medicare taxes taken from your paycheck, with the employer matching the employee's share.

Form 1041 is the federal income tax return that an estate or trust files to report income it earns while being settled or managed.

First in, first out (FIFO) is a cost basis method that treats your oldest shares as the ones sold first, which often means realizing larger gains on long-held investments.

Fiscal policy is the government's use of taxing and spending decisions to steer the economy. It is set by Congress and the President, separate from the central bank.

The foreign housing exclusion is a tax break that lets qualifying Americans working abroad exclude part of their employer-provided housing costs from US taxable income.

A foreign pension is a retirement plan based in another country, which can create complicated US tax and reporting issues for American participants.

The foreign tax credit reduces your U.S. tax dollar-for-dollar for income taxes paid to another country, preventing the same income from being fully taxed twice.

Form 709 is the federal gift tax return a donor files to report gifts above the annual exclusion, elect gift splitting with a spouse, or allocate generation-skipping transfer tax exemption.

Form 1040 is the main federal income tax return for individuals — the form where all your income, deductions, credits, and payments come together to settle what you owe or get refunded.

Form 1099-B is the form your broker sends reporting proceeds from sales of stocks, bonds, and other securities — the raw material for calculating capital gains and losses on your return.

Form 1099-DIV reports the dividends and capital gain distributions your investments paid you during the year, including how much qualifies for lower tax rates.

Form 1099-INT reports the interest income you earned from banks, brokerages, and other payers during the year.

Form 1099-K reports payments you received through payment cards and third-party platforms like payment apps or online marketplaces — receiving one doesn't by itself mean the money is all taxable income.

Form 1099-NEC reports nonemployee compensation — money a business paid you as an independent contractor or freelancer — to you and the IRS.

Form 1099-R reports distributions from retirement accounts, pensions, and annuities — including rollovers and conversions — which is why even non-taxable retirement account moves show up on IRS paperwork.

Form 8283 is the IRS form used to report noncash charitable donations once their value passes a set threshold.

Form 8938 is a tax form US taxpayers use to report specified foreign financial assets to the IRS when their value exceeds certain thresholds under FATCA.

IRS Free File is a partnership between the IRS and private tax-software companies that lets taxpayers under an income cap prepare and e-file their federal returns at no cost.

The generation-skipping transfer tax is an extra federal tax on wealth passed to grandchildren or others two or more generations younger, designed to keep families from skipping a round of estate tax.

Geoarbitrage is the strategy of earning income in a high-cost location or currency while living in a lower-cost one to stretch your money further.

A ghost preparer is someone who charges to prepare tax returns but refuses to sign them or include the required preparer tax identification number — a red flag that leaves the taxpayer alone on the hook for errors or fraud.

An election letting a married couple treat a gift made by one spouse as if made half by each, effectively doubling the amount they can give tax-free each year.

The rules for when a person must file a federal gift tax return, generally triggered when gifts to one recipient exceed the annual exclusion amount.

GoFundMe taxes refers to the tax questions around online fundraising — money given as a personal gift is usually not taxable income, but funds raised for a business or in exchange for something may be.

A grantor retained annuity trust lets you place assets in a trust and receive fixed payments for a set term, passing any growth above an IRS-assumed rate to your heirs with little or no gift tax.

Tax rules under which the person who created a trust is treated as its owner for income-tax purposes, so the trust's income appears on their personal return.

Green card holder finances covers the money and tax matters of US permanent residents, who are generally taxed on worldwide income and face special rules if they later leave.

Gross pay is your earnings before deductions, while net pay is what actually reaches you after taxes, benefits, and other withholdings are subtracted — the amount you take home.

Hobby income is money earned from an activity done mainly for enjoyment rather than profit, and unlike a business it does not allow you to deduct losses against other income.

The hobby loss rule prevents deducting losses from an activity carried on without a genuine profit motive — income from a hobby is taxable, but its expenses generally are not deductible.

A home-based business is a company run primarily from the owner's home, which may allow a tax deduction for the portion of the home used regularly and exclusively for the business.

A homestead exemption reduces the taxable value of a primary residence, lowering the owner's property tax bill and, in some states, offering protection from certain creditors.

The HSA receipt strategy involves paying medical bills out of pocket while saving the receipts, then reimbursing yourself from your HSA years later after the account has grown tax-free.

Imputed income is the value of a non-cash benefit — like employer-paid life insurance above a set coverage amount or personal use of a company car — that the IRS treats as taxable wages even though no money changes hands.

An in-kind donation is a gift of goods or services to a charity instead of cash.

Income a person had earned but not yet received at death — such as a final paycheck or IRA payout — which is taxed to whoever eventually receives it.

Income shifting is moving income from a taxpayer in a high tax bracket to one in a lower bracket — often between family members or business entities — to reduce the overall tax bill within legal limits.

A tax inflation adjustment is the IRS's annual recalibration of tax brackets, deductions, and other thresholds so that inflation alone does not push your taxes higher.

An inheritance tax is a state-level tax paid by the person who receives assets from someone who died, with rates that often depend on how closely related the heir was — there is no federal inheritance tax.

Injured spouse relief lets you recover your share of a joint tax refund that was seized to pay your spouse's separate debts, such as their past-due child support or defaulted student loans.

Innocent spouse relief can free you from tax, penalties, and interest caused by errors your spouse or ex-spouse made on a joint return that you did not know about and had no reason to know about.

An IRS installment agreement is a payment plan that lets you pay a tax debt in monthly installments over time instead of all at once, though penalties and interest continue to accrue.

An installment sale is a sale in which the seller receives at least one payment after the year of the sale, letting the gain be reported as the payments arrive rather than all at once.

An estate-planning trust built so its creator pays the income tax while the assets sit outside their taxable estate, letting the trust grow untaxed for heirs.

International health insurance is a policy that covers medical care across multiple countries, often used by expatriates, frequent travelers, and people living abroad.

An international money transfer is sending money across borders between accounts, which typically involves fees and a currency conversion.

An intrafamily loan is a formal loan between family members, often documented in writing with interest, which can offer lower rates than a bank while meeting IRS requirements.

The income-related monthly adjustment amount is an extra charge added to Medicare Part B and Part D premiums for people with higher incomes.

The IRS (Internal Revenue Service) is the federal agency that administers the tax code — collecting taxes, processing returns, issuing refunds, and enforcing tax law.

An IRS Identity Protection PIN is a six-digit code, changed each year, that must accompany your tax return — it blocks criminals from filing a fraudulent return in your name.

An IRS imposter scam is a fraud where a caller or message pretends to be the IRS, demanding immediate payment for supposedly unpaid taxes.

Income taxes that states and cities levy on athletes, entertainers, and other traveling workers for money earned while working within their borders.

The kiddie tax is a set of rules that taxes a child's unearned income — such as interest, dividends, and capital gains — above a small annual threshold at the parents' higher tax rate, closing the loophole of parking investments in kids' names.

The lifetime gift and estate tax exemption is the total amount a person can transfer during life and at death before federal gift or estate tax applies — gifts above the annual exclusion gradually use it up.

An income tax charged by a city, county, or other local government, layered on top of any state and federal income tax.

A marital trust holds assets for a surviving spouse, deferring estate tax until the second spouse dies.

A marriage bonus occurs when a couple owes less tax filing jointly than they would as two single filers — most common when one spouse earns most of the household income.

A marriage penalty occurs when a couple owes more total tax filing as a married couple than they would as two single filers — most common when both spouses earn similar high incomes.

A master limited partnership is a publicly traded partnership, often in energy, that passes income directly to investors and carries special tax treatment.

Material participation is the IRS standard for being genuinely involved in running a business or rental activity on a regular, continuous, and substantial basis — it determines whether the activity's losses are passive or fully deductible.

The medical expense deduction lets itemizers deduct qualifying unreimbursed medical and dental costs, but only the portion that exceeds a set percentage of adjusted gross income.

Medical tourism is traveling to another country to get medical or dental care, usually to pay much less than the same treatment would cost at home.

Medicare abroad refers to the fact that Medicare generally does not cover healthcare received outside the United States, so retirees living overseas usually need other coverage.

Once you enroll in any part of Medicare, you can no longer add money to a health savings account, though you can still spend down funds already in the account.

Medicare tax is the payroll tax that funds Medicare hospital insurance — unlike Social Security tax, it applies to all earned income with no wage cap.

The mileage deduction lets self-employed people and businesses deduct the cost of driving for work, usually by multiplying business miles by the standard mileage rate the IRS sets each year.

Modified adjusted gross income for the ACA is the income figure the Marketplace uses to determine subsidy eligibility, based on your tax return with certain items added back in.

A modified endowment contract is a life insurance policy funded so quickly that it loses some of the usual tax advantages on money you take out.

The mortgage interest deduction lets homeowners who itemize deduct interest paid on a home loan, up to loan-size limits set by federal law.

A multi-currency account is a bank or fintech account that lets you hold and manage money in several currencies at once, useful for travelers and cross-border earners.

The municipal bond tax exemption means interest from most state and local government bonds is free from federal income tax — and often from state tax too, when you buy bonds issued in your home state.

The nanny tax is the Social Security, Medicare, and unemployment taxes a household must pay when it employs a nanny, housekeeper, or other household worker and pays them above the IRS annual threshold.

The net investment income tax (NIIT) is a 3.8% federal surtax on investment income — interest, dividends, capital gains, and similar — for taxpayers whose income exceeds statutory thresholds.

Noncash charitable contributions are donations of property rather than money, such as clothing, a car, or shares of stock.

A nonqualified annuity is an annuity purchased with after-tax dollars outside a retirement account, so only the earnings portion of each withdrawal is taxed.

A nonrefundable tax credit can shrink your tax bill to zero but no further — any credit beyond what you owe is generally lost rather than paid out as a refund.

A nonresident alien is a non-US citizen who does not meet the tests for US tax residency and is generally taxed only on income from US sources.

An offer in compromise is an agreement that lets a taxpayer settle a tax debt with the IRS for less than the full amount owed when paying in full would create genuine financial hardship.

An offshore account is a bank or investment account held in a country other than where you live, which is legal but carries strict US reporting requirements.

The one-rollover-per-year rule limits you to a single 60-day IRA-to-IRA rollover in any 12-month period across all your IRAs — direct trustee-to-trustee transfers don't count against it.

An ordinary dividend is a dividend taxed at your regular income tax rates because it does not meet the requirements for the lower rates that apply to qualified dividends.

Ordinary income is income taxed at the regular bracket rates — wages, interest, short-term gains, and most retirement distributions — as opposed to income eligible for lower preferential rates.

Original issue discount is the gap between a bond's discounted price at issuance and its face value, which is generally treated as taxable interest earned gradually over the bond's life.

The overtime deduction is a temporary federal deduction created by the 2025 tax law for the extra "half" portion of time-and-a-half overtime pay, available up to an annual cap and phased out at higher incomes.

Overtime pay is the higher rate, commonly one and a half times regular wages, that eligible workers earn for hours worked beyond the standard full-time threshold.

An owner's draw is money a business owner takes out of the company for personal use, common in sole proprietorships and partnerships where it is not treated as a taxable wage.

A partnership is a business owned by two or more people who share profits, losses, and management, with the income passing through to each partner's personal tax return rather than being taxed at the business level.

The passive activity loss rules generally block losses from rental properties and other passive investments from offsetting wages or business income — the losses are suspended until passive income or a sale frees them.

A pay stub is the record accompanying your paycheck that itemizes your gross pay, taxes and deductions withheld, and the net amount you actually received.

A per diem is a fixed daily allowance a business pays or deducts to cover an employee's travel costs like lodging and meals, instead of tracking every individual receipt.

A passive foreign investment company, or PFIC, is a foreign-based pooled investment such as many overseas mutual funds that US owners must report under complex and often punitive tax rules.

An income phase-out is the range over which a tax benefit shrinks gradually as income rises, so a deduction or credit fades away instead of disappearing all at once.

The physical presence test is one way to qualify for the foreign earned income exclusion by being physically present in a foreign country for at least 330 full days during a 12-month period.

The portability election lets a surviving spouse claim the unused portion of a deceased spouse's federal estate-tax exemption by filing an estate tax return.

The premium tax credit is a refundable federal credit that lowers monthly premiums for health insurance bought through the ACA Marketplace, with the amount based on household income and reconciled on your tax return.

A private activity bond is a municipal bond that finances projects benefiting private entities; its interest is sometimes taxable and can be subject to the alternative minimum tax.

A progressive tax is one where the rate rises as income rises, so higher earners pay a larger share of each additional dollar — the design behind the U.S. federal income tax.

A property tax appeal is the formal process of challenging your home's assessed value with the local taxing authority in an effort to lower your property tax bill.

A property tax assessment is the value a local government assigns to your property to calculate how much property tax you owe.

A QTIP trust provides income to a surviving spouse for life while letting the original owner control who ultimately inherits the remaining assets, commonly used in blended families.

A qualified appraisal is a formal valuation by a qualified professional that the IRS requires when you deduct a donation of valuable property.

A qualified charity is a nonprofit recognized by the IRS as tax-exempt under section 501(c)(3), so donations to it can generally be tax-deductible.

A qualified dividend is a dividend that meets IRS requirements — mainly about the type of company paying it and how long you held the shares — so it is taxed at the lower long-term capital gains rates instead of ordinary income rates.

Qualified medical expenses are the health-related costs the IRS lets you pay for with tax-advantaged accounts like an HSA or FSA without owing tax or penalties.

A qualified opportunity zone is a designated lower-income area where investors can defer, and partly escape, capital gains tax by rolling gains into long-term funds that invest in the zone.

A qualified personal residence trust lets you transfer your home to your heirs at a reduced gift-tax value while continuing to live in it for a set number of years.

A qualified retirement plan is an employer-sponsored plan, such as a 401(k) or pension, that meets IRS and ERISA requirements in exchange for tax advantages for both the employer and employees.

Qualified small business stock is stock in certain small C corporations that, if held long enough, can let investors exclude a large share of the gain from federal tax when they sell.

A rule allowing tuition paid directly to a school on someone's behalf to escape gift tax, no matter the amount.

A qualifying disposition is a sale of shares from incentive stock options or an employee stock purchase plan that meets the required holding periods, allowing more of the gain to be taxed at favorable rates.

Quarterly estimated taxes are the tax payments freelancers and other self-employed people send to the IRS four times a year, since no employer withholds tax from their income.

Quarterly tax payments are the four estimated-tax installments self-employed people and others without withholding send the IRS across the year to keep pace with what they'll owe.

A realized gain is the profit locked in when you actually sell an investment for more than its cost basis, which is generally when taxes come due.

Reasonable compensation is the fair-market salary an S corporation owner-employee must pay themselves for the work they do before taking additional profit as distributions — the IRS scrutinizes owners who set it too low to dodge payroll taxes.

A refundable tax credit can reduce your tax below zero, meaning the IRS pays you the excess as a refund even if you owed little or no tax to begin with.

Remittances are money that people working in one country send back to family or others in their home country.

The income-tax questions that arise when someone lives in one state and works remotely for an employer based in another, which can affect where taxes are owed.

Renouncing US citizenship is the formal legal act of giving up citizenship, which ends future US tax filing obligations but can trigger an exit tax for some.

Rental income is the money collected from tenants, which is taxable but can be offset by deductions such as mortgage interest, repairs, and depreciation.

Resident alien taxes are the US tax rules for non-citizens who qualify as US residents, who are generally taxed on their worldwide income much like citizens.

Residential energy credits were federal tax credits for home efficiency upgrades and clean-energy systems like solar panels — the One Big Beautiful Bill Act ended them for expenses after 2025.

Restricted stock awards are grants of company shares given to an employee that carry conditions, such as staying with the company for a period, before the shares fully belong to the recipient.

Retiring abroad is spending one's retirement years in another country, often to lower living costs, while navigating taxes, healthcare, and benefit rules in both places.

Automated tax-loss harvesting is a robo-advisor feature that continuously scans a portfolio for positions trading at a loss and sells them to capture tax benefits, replacing them with similar investments so the money stays invested.

Room and board is the housing-and-food share of college costs, and it remains the tax code's term for a qualified 529 expense even though federal student aid law now calls its own version living expenses.

Royalty income is payment received for letting others use an asset you own, such as a patent, mineral rights, or a creative work.

RSU tax withholding is the tax taken out when restricted stock units vest, since their value counts as ordinary income — and the default withholding rate is often lower than what high earners actually owe.

An S Corp election is a tax choice that lets an eligible corporation or LLC pass its income through to owners' personal tax returns, and it can reduce self-employment tax by splitting pay between salary and distributions.

Pre-tax contributions, sometimes called salary sacrifice, are amounts taken from your paycheck before income tax is calculated, such as to a traditional 401(k), lowering your taxable income now.

Sales tax is the state and local tax added to the price of goods and some services at the point of purchase, collected by the seller and passed to the government.

The SALT deduction is the itemized federal deduction for state and local taxes — income or sales taxes plus property taxes — which is subject to an annual cap set by federal law.

Savings bond maturity is the point when a U.S. savings bond stops earning interest, after which holding it gains you nothing and any accrued interest becomes taxable if not already reported.

Schedule A is the Form 1040 attachment where you list itemized deductions — such as mortgage interest, state and local taxes, medical expenses, and charitable gifts — when they beat the standard deduction.

Schedule B is the Form 1040 attachment for detailing interest and ordinary dividend income when it exceeds the reporting threshold, and for disclosing foreign accounts.

Schedule D is the Form 1040 attachment summarizing your capital gains and losses from selling investments and other assets, separating short-term from long-term for their different tax treatment.

Schedule E is the Form 1040 attachment for reporting income from rental real estate, royalties, and pass-through entities like partnerships and S corporations.

A local income or property tax levied by a school district to fund public education, used in some states.

A second home is a property you own in addition to your primary residence, such as a vacation place, and it carries different tax and mortgage rules than a main home.

The Section 121 exclusion lets homeowners exclude up to $250,000 of gain ($500,000 for joint filers) when selling a primary residence they owned and lived in for at least two of the previous five years.

A Section 125 plan is the part of the tax code that allows employees to pay for qualifying benefits, like health premiums, with pre-tax income through their employer.

The Section 179 deduction lets small businesses elect to expense the full cost of qualifying equipment and software in the year of purchase, up to an annual limit, rather than depreciating it over time.

The self-employed health insurance deduction lets qualifying self-employed people deduct premiums they pay for medical, dental, and long-term care coverage from taxable income.

Sell-to-cover is a method of handling equity awards in which some of the vesting shares are automatically sold to pay the taxes due, letting you keep the remaining shares.

The senior deduction is a temporary extra federal deduction created by the 2025 tax law for taxpayers age 65 and older, available whether or not they itemize and phased out at higher incomes.

Short-term capital gains are profits from selling investments held one year or less, taxed at the same rates as your ordinary income rather than the lower long-term rates.

Social Security abroad refers to receiving US Social Security benefits while living in another country, which is possible for most retirees though some countries have restrictions.

The Social Security wage base is the annual cap on earnings subject to Social Security tax — wages above it escape that tax (though not Medicare tax), and the cap adjusts each year with wage growth.

Specific share identification is a cost basis method in which you choose exactly which shares to sell, giving you control over the size of the taxable gain or loss each sale creates.

Staking is locking up cryptocurrency to help operate a blockchain network in exchange for rewards, somewhat like earning interest, though the rewards are generally treated as taxable income.

State income tax is the tax a state levies on residents' (and sometimes nonresidents') income, with rates and rules varying widely — several states impose no income tax at all.

An agreement between neighboring states that lets residents who commute across the border owe income tax only to their home state.

State tax residency is the determination of which US state you legally live in for tax purposes, which controls where you owe state income tax.

The tax statute of limitations sets deadlines on both sides — generally three years for the IRS to audit a return and ten years to collect assessed tax, with no time limit when a return was never filed or was fraudulent.

The step transaction doctrine lets the IRS collapse a series of formally separate steps into a single transaction and tax the real result, defeating plans that only work if each step is viewed in isolation.

A stock option exercise is the act of using your options to buy company shares at the agreed price, converting the right to buy into actual ownership of the stock.

Substance over form is the tax principle that the IRS and courts judge a transaction by what actually happened economically, not by the labels or paperwork used to dress it up.

The substantial presence test is an IRS formula that counts days spent in the US over three years to decide whether a non-citizen is taxed as a US resident.

The tax withholding applied to pay beyond regular wages — such as bonuses, commissions, and severance — which follows special IRS rules.

Tax bracket arbitrage is the strategy of shifting income between years or account types so it is taxed at lower rates — for example, deducting contributions in high-earning years and withdrawing or converting in low-income years.

A tax audit is an IRS review of your return and supporting records to verify that income, deductions, and credits were reported correctly — most are handled entirely by mail.

Tax avoidance is the legal use of deductions, credits, timing, and account choices to reduce your tax bill — fully legitimate, in contrast to tax evasion, which is criminal concealment.

Tax basis is your investment in an asset for tax purposes — usually what you paid plus certain adjustments — and it determines how much gain or loss you report when you sell.

Tax Day is the annual federal deadline for filing individual income tax returns and paying any tax owed — normally April 15, shifted when that date lands on a weekend or holiday.

Tax drag is the reduction in investment returns caused by taxes on dividends, interest, and capital gains along the way, a cost that compounds meaningfully over time.

Tax evasion is illegally hiding income or faking deductions to escape taxes you legitimately owe — a federal crime, unlike tax avoidance, which uses legal strategies to reduce tax.

A tax extension gives you extra months to file your return, but it does not extend the deadline to pay — you still need to estimate and pay what you owe by the original due date to avoid penalties and interest.

Tax identity theft happens when a criminal files a fake return using your Social Security number to steal a refund — often discovered only when your real return is rejected as a duplicate.

A tax levy is the actual seizure of property to satisfy an unpaid tax debt — unlike a lien, which is only a claim, a levy lets the IRS take wages, bank balances, or other assets.

A tax lien is the government's legal claim against your property when you fail to pay a tax debt — it attaches to what you own and can complicate selling assets or borrowing until it is resolved.

Tax preparation is the work of assembling records and filing an accurate return for a year that has already ended — reporting what happened, in contrast to tax planning, which shapes what will happen.

A tax refund is the government returning your own money — it means your withholding and estimated payments exceeded your actual tax for the year, effectively an interest-free loan you made to the IRS.

A tax return is the annual filing — Form 1040 for most individuals — that reports your income, deductions, and credits and settles up whether you owe more or overpaid.

Tax scams are schemes that use fake IRS communications, inflated refund promises, or bogus credits to steal money or personal information — the IRS highlights the worst offenders in its annual Dirty Dozen list.

A tax shelter is any arrangement used to reduce taxable income — a spectrum running from ordinary retirement accounts to aggressive schemes the IRS labels abusive and penalizes.

Tax software is a program that walks you through preparing and e-filing your own tax return with built-in interview questions, calculations, and error checks.

A tax transcript is a free IRS summary of your tax return or account activity, often requested for mortgage applications, student aid, or resolving IRS issues in place of a full copy of the return.

A tax treaty is an agreement between two countries that sets rules for how residents are taxed on cross-border income, often to prevent the same income from being taxed twice.

An online IRS tool that helps workers check whether the right amount of tax is being withheld from their pay and adjust their W-4 if needed.

A tax year is the twelve-month period a tax return covers — the calendar year for nearly all individuals, though businesses may use a fiscal year ending in a different month.

A tax-deductible donation is a gift to a qualified charity that you can subtract from your taxable income if you itemize your deductions.

Tax-equivalent yield is the yield a taxable bond would need to pay to match a tax-free bond's return after taxes — the standard way to compare municipal bonds against taxable alternatives.

Tax-exempt income is income the federal government doesn't tax, the classic example being interest from municipal bonds — though some of it can still affect other tax calculations.

Tax-free growth means investment earnings inside certain accounts — like Roth IRAs and HSAs used for medical costs — are never taxed, not merely deferred until withdrawal.

Tax-gain harvesting is deliberately selling appreciated investments in a low-income year to realize gains at little or no tax — often pairing with the 0% long-term capital gains bracket — and resetting the cost basis higher.

Taxable income is the portion of your income that tax rates are actually applied to — what remains after subtracting deductions from your adjusted gross income.

Tipped income is money you earn from customer gratuities, which counts as taxable income and must be reported, even when paid in cash.

The tips deduction is a temporary federal deduction created by the 2025 tax law that lets workers in customarily tipped occupations deduct qualified tip income up to an annual cap, with the benefit phasing out at higher incomes.

A totalization agreement is a pact between the US and another country that coordinates their social security systems so workers avoid paying into both and can combine credits toward benefits.

The triple tax advantage describes the health savings account's unique treatment — contributions are deductible, growth is untaxed, and withdrawals for qualified medical expenses are tax-free.

Trump accounts are tax-favored savings accounts for children created by the 2025 tax law, with contributions invested on the child's behalf and a one-time federal seed deposit for eligible newborns.

The rules governing how income earned inside a trust is taxed, either to the trust itself or to the beneficiaries who receive distributions.

An underpayment penalty is the interest-based charge the IRS assesses when you didn't pay enough tax during the year through withholding or estimated payments, even if you pay in full when you file.

The unlimited marital deduction lets one spouse transfer any amount of assets to the other, during life or at death, free of federal gift and estate tax, as long as the recipient is a U.S. citizen.

An unrealized gain is the increase in value of an investment you still own — profit that exists on paper but is generally not taxed until you sell.

A tax owed on purchases when sales tax was not collected — for example on out-of-state or online buys — typically paid by the buyer directly.

A reduction in an asset's appraised value for gift or estate tax purposes — often on a family-business stake — reflecting limits like lack of control or marketability.

The Volunteer Income Tax Assistance (VITA) program offers free, IRS-certified tax return preparation to people with modest incomes, disabilities, or limited English proficiency.

A volunteer expense deduction lets you write off certain out-of-pocket costs of volunteering for a qualified charity, such as mileage or supplies, if you itemize.

A zero-coupon bond pays no periodic interest and is instead sold for less than its face value, paying the full amount at maturity; the built-in gain is generally taxable each year even before it is received.