Tax Glossary

A corporation that generally is exempt from federal income tax. Its shareholders include on their tax returns their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of income or loss not separately stated. An S corporation may have no more than 100 shareholders, may have only one class of stock, and must be a domestic corporation.

The estimated value of property at the end of its useful life. Salvage value is not used under the Modified Accelerated Cost Recovery System.

Generally, an amount paid or allowed to, or for the benefit of, a student at an educational institution to aid in the pursuit of studies.

A money substitute, such as a card or paper certificate, that is used in exchange for goods and services.

Sales, exchanges, and involuntary conversions of business, rental, and royalty property held longer than one year.

Any property that is or has been subject to depreciation or amortization and is personal property, a single purpose agricultural or horticultural structure, or a storage facility (other than a building or its structural components) used for the distribution of petroleum.

Real property (other than section 1245 property) that is or has been subject to an allowance for depreciation.

Property defined under section 179 of the IRS code for which a taxpayer can choose to recover all or part of the cost of the property (up to a limit) by deducting it in the year they place the property in service.

Assets listed in section 197 of the IRS code that a taxpayer can choose to amortize over a period of 15 years.

An independent contractor, a person who carries on a trade or business as a sole proprietor, an active member of a partnership, or a person who is in business for themselves in any other way.

Social Security tax and Medicare tax primarily for individuals who work for themselves.

A legal document, court order, or agreement specifying amounts paid to one spouse by another spouse while they live apart.

Property belonging to one spouse that is not community property.

The beneficiary, partner, or shareholder's distributive share of income and deductions from an estate, trust, partnership, or S corporation reported on a Schedule K-1.

The date by which property must be delivered and payment must be made.

An agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit (including the land), and one or more co-owners are entitled to occupy the unit as their main home upon payment of rent ot the other co-owner or owners.

A school operated by certain tax-exempt organizations (or by a state, a U.S. possession, a political subdivision of a state or possession, the U.S., or the District of Columbia) that provides special instruction or training designed to alleviate the disability of an individual.

A period of one year or less.

A payment to an employee to replace regular wages while they are temporarily absent from work due to sickness or personal injury.

A qualified retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees.

A qualified retirement plan, using IRAs, that certain small employers (including self-employed individuals) can set up for the benefit of their employees.

A written qualified retirement plan that allows self-employed individuals to make contributions toward their own, and their employees', retirement using a traditional individual retirement arrangement (called a SEP-IRA).

The required method of calculating the taxable portion of benefits from a qualified retirement plan with an annuity starting date after November 18, 1996.

Someone who owns an unincorporated business by themselves.

A business that is owned by one individual and is not incorporated.

A trustee or other administrator of a retirement plan.

The difference between an incentive stock option's exercise price and the stock's fair market value on the date of exercise.

A predetermined dollar amount that reduces the income subject to tax. The amount varies depending on the taxpayer's filing status, age, blindness, and dependency status.

A per mile rate, established by statute, that a taxpayer uses to calculate deductible vehicle expenses based on miles driven. Specific rates apply based on whether the use is for business, charity, moving, or medical reasons.

Costs for creating an active trade or business or investigating the creation of acquisition of an active trade or business. Start-up costs include any amounts paid or incurred in connection with any activity engaged in for profit and for the production of income in anticipation of the activity becoming an active trade or business.

A legislative act or law.

A worker who would normally be considered an independent contractor, but is treated by statute as an employee. Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain home workers.

A share in a company that represents the portion of the company's earnings and assets that a shareholder owns.

The ability to buy more shares in a company at a specified price for a limited time.

A method of calculating the depreciation for property that uses a percentage rate to deduct the same amount for each year in the recovery period. The percentage rate is determined by dividing one by the number of years in the recovery period.

An activity in which the taxpayer must perform significant duties over a reasonable period of time while working for pay or profit or in work generally done for pay or profit.

The value resulting from the future acquisition of goods or services used or sold by a business because of business relationships with suppliers including a favorable credit rating or a favorable supply contract.

The widow or widower of a deceased individual.