Glossary
These are the words the pages on this site actually use, in the sense those pages use them. Each entry links to the figures where the term does its work, because a definition is easier to trust next to the amount it governs.
No entry here states a figure. A number belongs on the page that carries the government document it was read from and the date it was checked against it, which is the arrangement described undermethodology. A definition is a summary of a rule and is not advice; where a definition and an agency document disagree, the document is right.
- Above-the-line deduction
A deduction subtracted in arriving at adjusted gross income, rather than after it. Because it comes first, you get it whether or not you itemize, and it lowers the AGI that later thresholds are measured against.
Used on Educator Expense Deduction, Student Loan Interest Deduction.
- Adjusted gross income (AGI)
Total income for the year less the adjustments the law allows before any standard or itemized deduction. It is the figure most eligibility tests are written against, which is why a deduction taken before it can change what you qualify for elsewhere.
Used on Adoption Credit, Earned Income Tax Credit, SALT Deduction Limit.
- Annual exclusion
The amount you may give one person in a calendar year without the gift counting against your lifetime exclusion or needing to be reported. It is per recipient and it resets each year.
Used on Gift Tax Exclusion, Estate Tax Exemption.
- Applicable exclusion amount
The total value that can pass free of estate and gift tax, expressed as an amount but applied as a credit against the tax. Lifetime gifts above the annual exclusion draw it down, so the estate and the gift figures are two views of one allowance.
Used on Estate Tax Exemption, GST Exemption.
- Carryover and grace period
The two ways an employer may let unspent flexible spending account money survive the end of a plan year: carry a limited amount into the next year, or allow a short extra period to spend it. A plan may offer one or neither, and the choice is the employer's rather than yours.
- Catch-up contribution
An extra amount, on top of the ordinary annual limit, that someone at or above a stated age may put into a retirement account or a health savings account. It is a separate figure with its own limit, and the qualifying age is not the same everywhere.
Used on 401(k) Catch-Up Contribution, IRA Contribution Limit, HSA Contribution Limit.
- Cost-of-living adjustment (COLA)
The annual change an agency applies to a benefit or a threshold to keep pace with measured inflation. The statute names the index and the method; the agency publishes the resulting percentage or amount, which is the number this site cites.
- Earned income
Pay for work: wages, salary, tips and net self-employment earnings. Interest, dividends, pensions and most benefits are not earned income, which matters wherever a rule is written against what you earned rather than what you received.
Used on Earned Income Tax Credit, IRA Contribution Limit, Child and Dependent Care Credit.
- Effective date, and the verification date beside it
Two different dates, and they answer different questions. The effective date is the day the figure begins to apply. The verification date is the day this site last checked that figure against the government document it was read from, so it moves when a record is re-checked while the figure itself stays exactly where it was.
Used on Minimum Wage, Standard Deduction.
- Elective deferral
Pay you direct into an employer retirement plan before it reaches you. The annual deferral limit is yours across every plan you take part in, and it is counted separately from what an employer puts in on your behalf.
Used on 401(k) Contribution Limit, 403(b) Contribution Limit, 457(b) Contribution Limit.
- Estimate, and not announced
Two of the three states a year page can be in. Official means the agency has published the figures. Estimate means they have not, and the amounts shown were computed here from published inputs. Not announced means no estimate is offered either, and the page says what is known rather than guessing. Only an official page is an agency figure.
Used on HSA Contribution Limit, Tax Brackets.
- Exempt employee
An employee outside the federal minimum wage and overtime protections. The usual executive, administrative and professional exemptions turn on two things at once: the salary paid must be at or above a stated threshold, and the work actually done must meet a duties test. Clearing the salary alone is not enough.
Used on Overtime Salary Threshold, Minimum Wage.
- Federal poverty line
The income guideline the health coverage rules are measured against, usually as a percentage of it and usually varying with household size. A figure written as a percentage of income is still anchored to it.
- Filing status
Which of single, married filing jointly, married filing separately, head of household or qualifying surviving spouse you file under. Almost every threshold on this site is stated per status, and married filing separately is frequently not simply half of the joint amount.
Used on Tax Brackets, Standard Deduction, Roth IRA Income Limit.
- High deductible health plan (HDHP)
A health plan whose annual deductible is at or above a stated minimum and whose out-of-pocket maximum is at or below a stated ceiling. Being covered by one is what makes a person eligible to contribute to a health savings account, so the plan definition and the contribution limit are published together.
Used on HSA Contribution Limit.
- Highly compensated employee
An employee whose prior-year pay was at or above a stated threshold, or who owned more than a stated share of the business. Retirement plans use the test to check that they do not favor the better paid, so the threshold binds the plan rather than the person.
Used on Highly Compensated Employee Threshold, SEP IRA Contribution Limit.
- Indexed for inflation
Written into the statute as a base amount that is adjusted each year by a named inflation measure, then rounded to a stated increment. The rounding is why an indexed figure often holds still for a year: the raw adjustment moved, but not far enough to reach the next step.
Used on Standard Deduction, Gift Tax Exclusion, Estate Tax Exemption.
- Itemized deduction
A deduction claimed by listing actual expenses instead of taking the standard deduction. It is one or the other, so an itemized deduction is only worth anything to you once your total itemized amount passes the standard deduction for your filing status.
Used on SALT Deduction Limit, Standard Deduction.
- Kiddie tax
The rule that taxes a child's unearned income above a threshold at the parent's rate rather than the child's. Unearned income here means interest, dividends and capital gains rather than wages from a job.
Used on Kiddie Tax Threshold.
- Marginal rate
The rate that applies to your next dollar of taxable income. A bracket taxes only the income inside it, so moving into a higher bracket raises the tax on the amount above the threshold and leaves everything below it taxed exactly as before.
Used on Tax Brackets, Capital Gains Tax Rate.
- Modified adjusted gross income (MAGI)
Adjusted gross income with certain items added back. There is no single MAGI: each provision defines its own, so two rules can measure different MAGI figures on the same tax return. The page for a provision states which one it means.
Used on Roth IRA Income Limit, Premium Tax Credit, Child Tax Credit.
- Phase-out
An income range across which a benefit shrinks to nothing instead of ending at a single point. Below the range you get it in full, above it you get none, and inside it the amount falls as income rises. The range is normally stated per filing status.
Used on Roth IRA Income Limit, Adoption Credit, Saver's Credit Income Limit.
- Placed in service
The date property is ready and available for its intended use, which is what the credit and depreciation rules turn on. It is not the date you paid, ordered or took delivery, and a year boundary between the two decides which year's figures apply.
Used on Bonus Depreciation Percentage, Clean Vehicle Tax Credit, Residential Clean Energy Credit.
- Qualified business income (QBI)
The net income of a qualifying trade or business carried on in the United States, as opposed to wages or investment return. Above a stated taxable income threshold the deduction based on it is limited by tests that do not apply below.
Used on QBI Deduction Threshold.
- Qualifying child
A dependant who meets tests of relationship, age, residence and support. Several credits use the phrase and not all of them apply the same age test, so a child can qualify for one credit and not another in the same year.
Used on Child Tax Credit, Earned Income Tax Credit, Child and Dependent Care Credit.
- Refundable and nonrefundable credit
A nonrefundable credit can reduce your tax to zero and no further. A refundable credit, or the refundable part of one, can be paid out beyond that point. It is the difference between a credit being worth its stated amount and being worth whatever tax you happened to owe.
Used on Child Tax Credit, American Opportunity Credit, Lifetime Learning Credit.
- Rev. Proc., Notice, Publication and Federal Register
The document types cited here. A Revenue Procedure or a Notice is where the IRS states the adjusted amounts for a year; a Publication explains the rules to taxpayers; the Federal Register carries an agency's formal notice, which is where the Social Security determinations and Labor Department rules appear. Every one of them is listed under sources with the stored copy the figures were read from.
Used on 401(k) Contribution Limit, Social Security COLA, Overtime Salary Threshold.
- Self-employment tax
The Social Security and Medicare tax paid by someone working for themselves, covering both the employee and the employer halves. The Social Security part stops at that year's wage base; the Medicare part does not stop.
Used on Self-Employment Tax, Social Security Wage Base.
- Snapshot, quote and offset
The evidence attached to every figure here. The snapshot is the extracted text of the source document, stored whole and served unchanged; the quote is the sentence in it that states the figure; the offset is where that sentence begins in the snapshot. Together they let you check a number without taking this site's word for it.
Used on HSA Contribution Limit, Minimum Wage.
- Standard deduction
A flat amount subtracted from adjusted gross income, set by filing status, taken instead of itemizing. Additional amounts are added for age and for blindness, which is why a page can carry several figures under one heading.
Used on Standard Deduction, Tax Brackets.
- Taxable income
What is left after the standard or itemized deduction and any other deduction the law allows. Brackets are applied to it, not to gross pay, which is why the top of your salary and the top of your bracket are rarely the same number.
Used on Tax Brackets, AMT Exemption.
- Tip credit and cash wage
Where the law allows it, an employer may count a portion of an employee's tips toward the minimum wage and pay a lower cash wage directly. The tip credit is that portion; the cash wage is what must be paid regardless. Tips plus cash wage must still reach the full minimum wage, and several states allow no tip credit at all.
Used on Tipped Minimum Wage, Minimum Wage.
- Wage base
The ceiling of one worker's earnings that a payroll tax applies to in a year. Earnings above it are not subject to that tax, and the ceiling restarts each January whether or not the job did.
Used on Social Security Wage Base, FUTA Wage Base.
A term that is missing, or an entry that reads wrong beside the document it claims to summarize, is worth an email: see contact. Where a figure itself disagrees with its source, corrections is the page.