Income and rates
- Gross income: all income you receive that isn’t exempt.
- Adjusted gross income (AGI): gross income minus certain adjustments. Learn more.
- Taxable income: AGI minus deductions; the amount the brackets apply to.
- Marginal tax rate: the rate on your last dollar of taxable income. Brackets.
- Effective tax rate: total tax divided by total income.
- Capital gain: profit from selling an asset. Rates.
Deductions and credits
- Standard deduction: a fixed amount you subtract from AGI. Compare.
- Itemized deductions: specific expenses listed on Schedule A.
- Above-the-line deduction: an adjustment that reduces AGI.
- Tax credit: reduces your tax dollar for dollar.
- Refundable credit: can create a refund even if you owe no tax.
- Nonrefundable credit: can reduce tax to zero but not below.
- Phase-out: a gradual reduction of a benefit as income rises.
Forms and filing
- Form 1040: the main individual income tax return.
- W-2: wages and withholding from an employer.
- 1099: a family of forms reporting other income. 1099-NEC, 1099-K.
- W-4: tells your employer how much to withhold. Fill it out.
- Filing status: single, married filing jointly, etc. Choose.
- Dependent: a qualifying child or relative you may claim. Rules.
Payments and process
- Withholding: tax taken from your pay. How it works.
- Estimated taxes: payments you make during the year on untaxed income. Details.
- Self-employment tax: Social Security and Medicare tax for the self-employed. Explained.
- Basis: what you paid for an asset, used to compute gain.
- Transcript: an IRS summary of your return or account. Get one.
- Extension: more time to file, not to pay. Explained.
Next steps
With these terms, our complete filing guide will read more easily. For deductions and credits, see the guide.
Terms people commonly confuse
- Deduction vs. credit. A deduction reduces the income you’re taxed on; a credit reduces the tax itself. A $1,000 deduction is worth roughly $100–$370 depending on your bracket, while a $1,000 credit is worth $1,000. See the deductions and credits guide.
- Marginal vs. effective rate. Moving into a higher bracket doesn’t tax all your income at the higher rate. The brackets guide shows how the slices work.
- Withholding vs. tax owed. Withholding is a prepayment. Your return calculates what you really owe, and the difference is your refund or balance due. See the refund guide.
- Extension to file vs. extension to pay. An extension gives more time to file only; interest and late-payment penalties still start after the original deadline.
- Employee vs. independent contractor. Employees get a W-2 and have taxes withheld; contractors usually get a 1099 and pay self-employment tax themselves.
Where to look up official definitions
The IRS publishes its own glossary in Publication 17 and in each form’s instructions. When a term has a legal meaning that affects eligibility (for example “qualifying child” or “modified adjusted gross income”), always check the definition in the instructions for the specific form, because the same words can mean slightly different things in different contexts.
Official sources
General information only — not tax, legal or financial advice. Tax figures change every year; verify the current numbers at IRS.gov or with a qualified professional. Read the full disclaimer.