Tax Basics
The portion of your income subject to taxation, calculated as total income minus deductions and exemptions.
Taxable Income
A non-cash expense that lets you write off the cost of equipment or machinery over its useful life.
Depreciation
General term for an expense you subtract from gross income before computing tax.
Deduction
The percentage cost you pay over the principal when borrowing money.
Interest Rate
This is the single biggest factor in your credit score.
Payment History
Periodic payments made throughout the year on the income you expect to owe.
Estimated Tax Payments
The trigger event for a formal IRS review of your books and tax returns.
An IRS Audit
Give an example of a common deductible expense for a small business.
Office Supplies (or other)
The asset a lender can seize if you default on your loan.
Collateral
Keeping this ratio below 1 helps lenders see you as less risky (Liabilities ÷ Equity).
Debt-to-Equity
This form reports various types of income, often received by subcontractors.
Form 1099
Three common audit red flags in construction: inconsistent reporting, high deduction claims, and this blending of expenses.
Mixing Personal & Business
Under Section 179, small businesses can elect to expense up to a certain dollar amount of eligible equipment purchases immediately rather than depreciate—true or false?
True
The complete yearly borrowing cost, including interest rate plus fees, abbreviated APR stands for?
Annual Percentage Rate (APR)
A business owner with a score of 620 and an 85% utilization rate would mostly benefit from focusing here first.
Lowering Utilization
A direct reduction in tax liability, dollar-for-dollar, that you claim after computing taxable income.
Tax Credit
Name two major expense categories you’d record for “Smith & Sons Contracting” when filling out a basic tax form with $250K revenue.
Direct costs (e.g. materials, labor) and Indirect costs (overhead)
Which is generally more valuable directly: a deduction or a credit?
A Credit
A high ratio indicating you’ve financed much of your assets with debt rather than equity.
Debt-to-Equity
Name one document—beyond tax returns—that lenders commonly require to assess your projected ability to repay.
Profit & Loss Statement (or Cash-Flow Projection)
The law-mandated penalties you might face if you underreport income or miss payment deadlines.
Failure-to-file/failure-to-pay penalties
Beyond bookkeeping, this professional service can help ensure you’re prepared if the IRS comes knocking.
CPA or Tax Advisor
Name the calculation to derive taxable income when given total income, deductions, and exemptions.
Taxable Income = Total Income − Deductions − Exemptions
This metric measures your ability to cover interest payments, computed as net operating income divided by total debt service.
Debt Service Coverage Ratio (DSCR)
This portion of SWOT would list “Growing demand for eco-friendly builds,” for example.
Opportunities