Individual Income Tax Overview, Dependents, and Filing Status

Vocabulary flashcards for individual income tax, dependents, and filing status.

Gross Income

The starting point in calculating individual income tax, including all realized income unless specifically excluded or deferred.

Adjusted Gross Income (AGI)

Gross income less for AGI (above the line) deductions.

Taxable Income

Adjusted gross income (AGI) less from AGI (below the line) deductions, such as the greater of standard or itemized deductions, and the deduction for qualified business income.

Realized Income

A measurable change in property rights; all realized income is included in gross income unless specifically excluded or deferred.

Recognized Income

Income reported on a tax return.

Excluded Income

Income that is never included in taxable income, such as municipal bond interest and gain on the sale of a personal residence.

Deferred Income

Income that is included in a subsequent tax year, such as installment sales and like-kind exchanges.

Tax-Exempt Income

Income that is not subject to tax.

Tax-Deferred Income

Income that is not taxed in the current year but will be taxed in a future year.

Ordinary Income

Income taxed at ordinary rates from the tax rate schedule.

Capital Asset

Generally, all assets except accounts receivable, inventory, and assets used in trade or business (including supplies).

Net Capital Gains

Net long-term capital gains in excess of short-term capital losses, taxed at preferential rates.

Deductions for AGI

Deductions taken 'above the line' to reduce gross income and determine adjusted gross income (AGI).

Deductions from AGI

Deductions taken 'below the line' to reduce adjusted gross income (AGI) and determine taxable income; includes the greater of standard or itemized deductions.

Tax Credits

Items that reduce tax liability dollar for dollar.

Tax Prepayments

Payments already made toward tax liability, such as withholdings and estimated tax payments.

Qualifying Child

A child who meets the relationship, age, residence, and support tests to be claimed as a dependent.

Qualifying Relative

A relative who meets the relationship, support, and gross income tests to be claimed as a dependent.

Filing Status

Determines the tax rates and standard deduction amount a taxpayer will use; examples include single, married filing jointly, married filing separately, head of household, and qualifying surviving spouse.

Married Filing Jointly

A filing status for married couples who are married on the last day of the year and agree to file together.

Married Filing Separately

A filing status for married individuals who choose to file separate tax returns.

Head of Household

A filing status for unmarried individuals who pay more than half the costs of keeping up a home for a qualifying child or relative.

Qualifying Surviving Spouse

A filing status available for the two years following the year of a spouse's death, if the surviving spouse maintains a household for a dependent child.