| As a courtesy to our clients, we have compiled a comprehensive list of common tax terms and definitions for quick reference. | Tax Lingo Troubles? |
Accrual method of accounting |
A business method of accounting requiring income to be reported when earned and expenses to be deducted when incurred. However, deductions generally may not be claimed until economic performance has occurred. |
| Term | Definition |
|---|---|
| Marital deduction |
An estate tax and gift tax deduction for assets passing to a spouse. It allows estate and gift transfers completely free of tax. |
| Market discount |
The difference between face value of a bond and lower market price, attributable to rising interest rates. On a sale, gain on the bond is generally taxed as ordinary income to the extent of the discount. |
| Married Filing Jointly |
A married couple may file a joint return together. If your spouse died during the year, you may still file a joint return with that spouse for the year of death. This information provided by the Internal Revenue Service: http://www.irs.gov/newsroom/article/0,,id=105098,00.html |
| Married Filing Separately |
A married couple may elect to file their returns separately. This information provided by the Internal Revenue Service: http://www.irs.gov/newsroom/article/0,,id=105098,00.html |
| Material participation tests |
Rules for determining whether a person is active in a business activity for passive activity rule purposes. Unless the tests are met, passive loss limits apply. |
| Miscellaneous itemized deductions |
Generally, itemized deductions for job and investment expenses subject to a 2% of adjusted gross income floor. |
| Modified ACRS (MACRS) |
Depreciation methods applied to assets placed in service after 1986. |
| Modified adjusted gross income (MAGI) |
This is generally adjusted gross income increased by certain items such as tax-free foreign earned income. MAGI usually is used to determine phaseouts of certain deductions and credits. |
| Mortgage interest |
Fully deductible interest on up to two residences if acquisition debt secured by a home is $1 million or less, and home equity debt is $100,000 or less. |