Tax Basics & Framework
This tax rate equals total tax divided by total taxable income.
What is the average tax rate?
The main personal federal income tax filing form.
What is the 1040?
This filing status generally provides the highest standard deduction for married couples.
What is married filing jointly?
The amount of money that taxpayers can subtract, dollar for dollar, from the income taxes they owe.
What is a tax credit?
This type of interest is generally excluded from gross income if issued by state or local governments.
What is municipal bond interest?
Entertainment expenses and political contributions are treated as _________ expenses under current law.
What are nondeductible?
This depreciation system applies to most business assets.
What is MACRS?
A type of tax where everyone pays the same percentage of their income.
What is a flat (proportional) tax?
What is a W-2?
A qualifying child must meet the relationship, age, residency, and ____________ test.
What is the support test?
Families with children can usually claim this tax credit for each dependent child.
What is the Child Tax Credit?
This term describes all income from whatever source derived unless specifically excluded.
What is gross income?
Schedule C income is subject to both income tax and this additional tax.
What is self-employment tax?
When a business places most of its depreciable assets into service evenly throughout the year this depreciation convention generally applies.
What is the half-year convention?
Federal income taxes are typically due on this date.
What is April 15th?
This form is used by sole proprietors and certain single-member LLCs to report the profit or loss from their business activities on their personal income tax return.
What is a Schedule C?
This filing status is available to unmarried taxpayers who pay more than half the cost of maintaining a home for a dependent.
What is head of household?
These expenses, like charitable donations or medical expenses, can be deducted from your taxable income.
What are itemized deductions?
This is the last line on the 1040 before standard or itemized deductions are applied.
What is adjusted gross income (AGI)?
Meals provided during business travel are generally deductible at this percentage.
What is 50%?
This convention applies when more than 40% of depreciable property is placed in service in the last quarter.
What is the mid-quarter convention?
This type of gain is generally eligible for preferential tax rates of 0%, 15%, or 20%.
What is long-term capital gain?
This IRS tax form is used to report payments of at least $600 made to a person who is not an employee for services performed for a trade or business.
What is Form 1099-NEC?
Widow(er)s can continue to file as married filing jointly for this period of time after their spouse passes away.
What is 1 year?
Unearned income of a child may be taxed at the parents' marginal rate under this rule.
What is the kiddie tax?
This deduction is taken below AGI, does not reduce self-employment tax, and is available only to owners of pass-through entities.
What is the Qualified Business Income (QBI) deduction?
This election allows businesses to expense qualifying assets immediately rather than depreciate them.
What is the Section 179 election?
Section 179 election applies to this type of property but not to land.
What is tangible personal property?
This doctrine presents taxpayers from avoiding tax by shifting income children or relatives.
What is the assignment of income doctrine?
Unemployment compensation, prize money, gambling winnings, alimony received (pre-2019 divorce agreements) are included on this tax form.
What is Schedule 1?
A taxpayer's filing status is determined as of this specific date.
What is December 31?
This type of credit can reduce tax liability only to zero.
What is a nonrefundable credit?
Barter income must be reported at this value.
What is FMV?
Losses from activities not engaged in for profit are limited under this rule.
What is the hobby loss rule?
Nonresidential real property is depreciated over this recovery period.
What is 39 years?
This limitation caps the deduction for state and local taxes paid at $40K for 2025.
What is the SALT cap?
This IRS schedule reports capital gains and losses.
What is Schedule D?
A full-time college student under this age may qualify as a qualifying child.
What is age 24?
Individual taxpayers may deduct capital losses up to this amount per year.
What is $3,000?
Taylor receives a lawsuit settlement. Her damages for physical injury are excluded from gross income; her ___________ damages are taxable.
What is punitive?
To be deductible, business expenses must be ordinary and ______________.
What is necessary?
If a business elects Section 179 expensing that exceeds its taxable income from the business, this is what happens to the excess.
What is carried forward to future years?