Grossbach Zaino & Associates, CPA's, PC

Know Your Tax Talk

Leave a comment

Credits, deductions, withholding, oh my! Tax vocabulary can be confusing. Here are explanations for some common terms that you should know.

 

Adjusted gross income (AGI). Calculated by taking all of your gross income from taxable sources (wages, dividends, interest, capital gains, etc.) minus specified deductions that are allowed in arriving at AGI, such as qualified retirement plan contributions, alimony payments, etc.

 

Deductions. Expenses that are subtracted from your AGI. You can take either the standard deduction, an inflation-adjusted fixed amount, or you can itemize deductions by listing specific expenses, such as real property taxes, qualifying mortgage interest, and charitable contributions.

 

Exemptions. An amount you can deduct for yourself, your spouse (on a joint return), and each dependent.

 

Taxable income. What’s left after your gross income is reduced by allowable adjustments, deductions, and exemptions.

 

Credits. Subtracted directly from your tax liability to reduce the amount of tax you owe.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s