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AGI is your gross income after adjustments. It's important because it determines your eligibility for certain tax credits and deductions.

A fixed dollar amount that reduces the income you're taxed on. It varies by filing status and is adjusted annually for inflation.

Expenses that can be subtracted from AGI to determine taxable income. Taxpayers use this if it's more beneficial than the standard deduction.

Reduces your tax liability dollar for dollar. More beneficial than deductions because they reduce your tax bill directly.

Reduces the amount of income subject to tax. It lowers your overall tax liability.

Income on which tax must be paid; total income minus deductions and exemptions.

Tax paid on the profit from the sale of property or an investment. Long-term gains are taxed at different rates than short-term gains.

Income earned from working such as wages, salaries, and tips. It's subject to income tax and Social Security/Medicare tax.

Income from sources other than employment, such as dividends, interest, and retirement income. Different tax rules may apply.

A category that defines a taxpayer's filing requirements, standard deduction, and tax rates. Examples are Single, Married Filing Jointly, etc.

A person other than the taxpayer or spouse who entitles the taxpayer to claim a dependency exemption.

An amount that can be deducted from AGI for the taxpayer, their spouse, and eligible dependents. Reduction in taxable income.

The tax covering Social Security and Medicare for individuals who work for themselves. Calculated as a percentage of net earnings.

Taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their staff.

The portion of an employee's wages that is not included in their paycheck because it's sent directly to the tax authorities.

Payments made in advance on expected tax liability for the year, common for self-employed individuals or those without withholding.

A range of incomes taxed at a given rate. Taxpayers pay the rate only for the income within that bracket, leading to a progressive tax system.

A parallel tax system designed to ensure that certain taxpayers pay at least a minimum amount of tax.

The illegal act of not paying taxes, by not reporting all taxable income, or by taking unallowed deductions.

The legal usage of the tax regime to one's own advantage, to reduce the amount of tax that is payable by lawful means.

The Internal Revenue Service; the U.S. federal agency responsible for the collection of taxes and enforcement of tax laws.

A review or examination of an individual's or organization's accounts and financial information to ensure information is reported correctly.

A form(s) filed with a taxing authority that reports income, expenses, and other relevant financial information. Determines tax liability.

The form that an employer must send to an employee and the IRS at the end of the year, reporting employee's annual wages and amount of taxes withheld.

A series of documents the IRS refers to as 'information returns'. There are several 1099s, which report various types of income other than wages.

A tax form used by sole proprietors to report business income and expenses as part of the personal tax return (1040).

Total income from all sources before any deductions or expenses. It's important as the starting point for determining AGI.

The 12-month period for which tax returns are prepared. It can be a calendar year (Jan-Dec) or a fiscal year if specified by the taxpayer.

A credit given for each qualifying child under a certain age, which can significantly reduce a taxpayer's liability.