Comprehensive Tax Vocabulary

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1040 Form

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The standard IRS form that individual taxpayers use to file their annual income tax returns.

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Adjusted Gross Income (AGI)

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Gross income minus certain adjustments, such as student loan interest or retirement contributions.

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Alternative Minimum Tax (AMT)

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A parallel tax system designed to ensure that high-income individuals, corporations, trusts, and estates pay at least a minimum amount of tax; it disallows certain deductions and credits.

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Above-the-Line Deduction

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Adjustments to income that reduce gross income, such as student loan interest.

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Balance Due

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The amount of taxes owed after accounting for withholdings and credits.

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Below-the-Line Deduction

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Deductions taken after AGI is calculated, such as itemized deductions.

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Capital Gain

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The profit from the sale of property or an investment; if the asset was held for more than a year, it is considered a long-term capital gain and may be taxed at a lower rate.

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Capital Loss

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The loss incurred when a capital asset decreases in value and is sold for less than its original purchase price.

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Certified Public Accountant (CPA)

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A licensed accounting professional qualified to prepare tax returns and provide tax advice.

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Child Tax Credit

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A tax credit offered to parents or guardians for each qualifying dependent child under a certain age; the amount and eligibility criteria can vary annually.