The tax glossary without the jargon

Your total income minus specific adjustments like retirement contributions and student loan interest. AGI drives eligibility for most credits and deductions, which makes it the most important single number on your return.

A flat amount everyone can subtract from income instead of itemizing. For tax year 2025 it is $15,750 single and $31,500 married filing jointly.

Listing actual deductible expenses, like mortgage interest, state and local taxes up to the cap, and charitable gifts, instead of taking the standard deduction. You use whichever is larger.

The rate on your next dollar of income, set by your bracket. A raise never costs you money; only the dollars inside the higher bracket are taxed at the higher rate.

Total tax divided by total income. Always lower than your marginal rate, and the more honest measure of what you actually pay.

Tax your employer sends to the IRS from each paycheck based on your W-4. Too much means a big refund and a year of interest-free lending; too little means an April bill.

The form employers issue showing wages and tax withheld. It must match what the IRS already has on file, which is why returns wait for the real one.

Reports money paid to independent contractors. Income on it carries self-employment tax, and the matching business expenses are deductible against it.

Reports payment-app and marketplace transactions. It shows gross volume, not profit, so the real taxable number is built from your records.

The form where self-employed income and business expenses meet. Net profit from Schedule C drives both income tax and self-employment tax.

The 15.3 percent that covers Social Security and Medicare when no employer splits it with you. It applies to net self-employment profit above $400.

Quarterly payments self-employed people and investors make in place of withholding, due roughly mid-April, mid-June, mid-September, and mid-January.

A dollar-for-dollar reduction of the tax itself. A $1,000 credit saves $1,000, which makes credits more valuable than deductions of the same size.

Reduces the income that gets taxed. Its value equals the amount times your marginal rate, so $1,000 deducted at 22 percent saves $220.

A credit that can push your refund below zero tax owed, meaning the IRS pays you the difference. The earned income credit is the classic example.

A refundable credit for working households under income limits that rise with children. One of the most commonly missed credits in DIY returns.

A per-child credit with income phase-outs. Eligibility and the refundable portion depend on income, age, and dependency rules.

Someone you support who qualifies you for credits and filing statuses. Residency, support, and relationship tests decide it, not just who lives with you.

Single, married filing jointly, married filing separately, head of household, or qualifying surviving spouse. It sets your brackets and standard deduction, and the wrong one is a common DIY error.

A filing status for unmarried people paying more than half the cost of a home for a qualifying person. Better brackets than single, and frequently claimed wrong in both directions.

Profit from selling an asset. Held over a year it is long-term and taxed at 0, 15, or 20 percent; held a year or less it is taxed like wages.

What you paid for an asset, plus adjustments. Reported gains are sale price minus basis, and missing basis is why IRS letters overstate what traders owe.

Deducting an asset's cost over its useful life. Landlords and business owners use it constantly, and skipping it only hurts, since the IRS treats it as taken either way.

Form 1040-X, used to fix a filed return. Refund claims generally must be filed within three years, which is why old mistakes are often still worth money.

An IRS review of a return. Most are letters about one item, not agents at the door, and on-time documented responses resolve the majority.

A letter from the IRS, each with a code in the corner. Most are routine when answered inside their deadline. Our decoder covers the common ones in plain English.

Form 4868 moves the filing deadline to mid-October. It extends time to file, not time to pay, so a payment estimate still matters in April.

A loan against your expected refund. Terms range from genuinely free to effective APRs in the double or triple digits, so the agreement is the part to read.

The preparer tax identification number the IRS requires for anyone paid to prepare returns. A preparer unwilling to sign with one is the loudest red flag in the industry.

Up to 20 percent off qualifying self-employment and pass-through business income, with phase-outs. Most freelancers qualify and software quietly under-asks about it.