AGI? Progressive taxation? Taxable Income? You may recognize these words as part of the English language, but you very well may not know what they mean. Don’t feel defeated; tax season is harrowing enough without confusing industry jargon. That’s why the team of Tax Town Brooklyn, staffed with tax lawyers brooklyn, have provided definitions of five terms that will help you survive tax season.
Calculating Adjusted Gross Income (AGI) is the first step taken when filing your federal income tax bill. AGI is the sum of your income over the course of the year, including wages, interest and dividends, minus certain expenditures such as alimony payments, moving costs and business expenses.
Tax Deductions are the costs that the Internal Revenue Service (IRS) allows citizens to deduct from their annual income. Tax deductions are categorized as either standard deductions or itemized deductions.
Standard Deductions are the fixed amounts the IRS permits taxpayers to deduct from their annual income. The amount of the deduction is dependent on the taxpayer’s filing status, and may change annually.
Taxpayers who opt out of the standard deduction method instead choose to itemize their deductions. Items that can be deducted include: casualty and theft losses, unreimbursed employee expenses, mortgage interest, medical expenses, and more.
The U.S. tax system uses a progressive taxation model. This means that as income level increases, higher tax rates are applied to the taxpayer. The U.S. categorizes taxpayers into brackets, beginning with low-income individuals in the 10% bracket, progressively rising to 39.6% for the highest-income taxpayers.
If you’re still feeling a bit confused, don’t fret. Tax Town Brooklyn offers tax service brooklyn that eases the process! Contact the team and watch your tax troubles drift away.