Income Tax Vocabulary and Forms

Essential Tax Vocabulary

• Gross Income: Everything you earned during the year—wages, tips, interest, dividends, and even gambling winnings.

• Adjusted Gross Income (AGI): This is your Gross Income minus specific "above-the-line" deductions (like student loan interest or IRA contributions). It is the magic number used to determine your eligibility for many tax breaks. It is the amount of money that you actually pay income tax on.

Essential Tax Vocabulary

Tax Deduction: An amount that reduces the portion of your income that is subject to tax.

• Standard Deduction: A fixed dollar amount that reduces your taxable income based on your filing status ($16,100 for single filers in 2026).

• Itemized Deductions: Specific expenses (mortgage interest, medical bills, charity) you list individually if they add up to more than the standard deduction.

Essential Tax Vocabulary

Tax Credit: These are more powerful than deductions. While a deduction lowers your taxable income, a credit reduces your actual tax bill dollar-for-dollar.

Refundable tax credit: You get the full amount of the credit. if your rax bill is smaller than the credit, the IRS will sen you a check for the balance

Non-refundable tax credit: If this credit is bigger than your tax bill, it will reduce your tax bill to 0 but you will not get any money.

Essential Tax Vocabulary

• Withholding: The amount of money your employer takes out of your paycheck and sends to the IRS on your behalf throughout the year.

• Tax Bracket: The rate at which your income is taxed. The U.S. uses a "progressive" system, meaning you pay higher rates only on the portions of your income that fall into higher tiers.

Essential Tax Vocabulary

• Marginal Tax Rate: The tax bracket that your income is in. It is the highest rate charged on part of your income.

• Effective Tax Rate: The actual rate you pay on your income. This is calculated by dividing the amount of tax you pay by your income.

Forms You Receive (Income Reports)

Forms You File (The Return)

​Form 1040: The "Main Event." This is the standard form everyone uses to file their annual individual income tax return.

Schedule A: Used if you decide to itemize your deductions instead of taking the standard amount.

Schedule C: Used by self-employed individuals to report profit or loss from their business.

Forms for Your Employer

Form W-4: This form tells your employer how much tax to withhold from your check to pay the IRS for your income tax

Form I-9: This form proves your citizenship status and / or eligibility to work in the United States.