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GLOSSARY
Tax credits
These are like coupons for the supermarket. You can use them to reduce the amount of tax you owe.
Tax deductions
Amounts of money that the IRS allows you to subtract from your income before computing your income tax. These are similar to tax credits.
Tax deferral
Postponing your taxes to a later date or even year. This will only delay your liability it will not make it disappear.
Tax deferred
Earnings and income that are not taxable now but will be at a later date. This is most common in retirement plans distributions.
Tax exempt
The part of your income that is not taxable or subject to tax.
Tax fairness
Tax fairness is the concept that all taxpayers should be assessed an equivalent and fair level of income taxes. Those who argue for tax fairness take issue with tax loopholes that unfairly benefit a minority segment of taxpayers.
Tax home
Tax home is a taxpayer's primary place of residence. This concept is relevant in the calculation of tax-deductible travel and transportation expenses.
Tax impound
Money collected by the lender for the annual tax payment.
Tax liability
The amount of money you owe for taxes.
Tax lien
When taxes are not paid, a tax lien is put against the property before it can be sold in order to secure that the taxes will be paid.
Tax preference items
Tax preference items are specific income and expense figures that are used in the calculation of Alternative Minimum Tax (AMT) in U.S. tax law. Some of the tax preference items are: addition of personal exemptions, addition of standard deduction, subtraction of any state and local tax refund included in gross income, and changes to passive activity loss deductions.
Tax return
Tax return is a generic term for the set of forms that are submitted to a taxing authority (such as the IRS) which document an individual's or entity's annual tax liability.
Tax sale
When the government sells a property in order to recover unpaid taxes. The property is sold to the highest bidder at a public auction after the owner and mortgage company have been given notice.
Tax schedules
Forms published by the IRS for persons with a taxable income of more than $100,000, used to calculate their income tax.
Tax shelter
An investment that makes it feasible to hide money from taxes. The IRS has out restrictions on tax shelters when it seems the sole purpose of the investment is to evade paying taxes.