Tax Glossary: Terms You Need To Know
Taxes can be complex, and navigating them could be daunting, especially when you don’t understand the terms used. With that in mind, today we provide you with a comprehensive glossary of common tax terms.
Adjusted Gross Income (AGI)
AGI is your total income from all sources before any adjustments are made for deductions or exemptions. Your AGI is used to determine your eligibility for certain tax deductions and credits.
Taxable Income is the portion of your income subject to taxes. To calculate your taxable income, start with your AGI, deduct any deductions and exemptions you’re eligible for, and subtract any credits.
A qualifying child or qualifying relative, other than yourself, who entitles you to claim a dependency exemption.
Deductions are expenses you can subtract from your AGI to lower your taxable income. Some common deductions include interest paid on student loans, contributions to retirement accounts, and charitable donations.
Amount that taxpayers can claim for a “qualifying child” or “qualifying relative”. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year.
Exemptions are a set amount subtracted from your taxable income for each person on your tax return. There are two types of exemptions: personal and dependency.
Can be claimed for yourself and your spouse. Each personal exemption reduces the income subject to tax by the exemption amount.
Tax credits are amounts that directly reduce your tax bill. Unlike deductions, which only lower your taxable income, tax credits are a dollar-for-dollar reduction in your tax liability. Some common tax credits include the Earned Income Tax Credit, Child Tax Credit, and Education Credits.
JT Tax Services: Taxes Made Easy
When it comes to taxes, knowledge is power. That’s why at At JT Tax Services, we give you the peace of mind that comes with knowing that you are working with experienced professionals with in-depth knowledge of all applicable tax laws and regulations.
We are located in Oxnard, California, contact us today by email (firstname.lastname@example.org), telephone (805-984-8890), or through our social media accounts on Facebook, Twitter, and LinkedIn to schedule a consultation or to learn more about our services. Feel free to contact us today!