Key Tax Terms
This is the amount of income that is actually subject to taxation after subtracting deductions and exemptions.
What is Taxable Income
In this simple business structure, a single individual owns the business and is personally liable for all its debts.
What is a Sole Proprietorship?
These are specific amounts, like mortgage interest or medical expenses, that you subtract from your gross income to lower your taxable income.
What are Deductions?
This method spreads the cost of a business asset evenly over its entire useful life.
What is Straight-Line Depreciation?
This is an official examination by the government of a business’s accounts to ensure they are following tax laws.
What is an Audit?
These are periodic tax payments made throughout the year instead of all at once in April.
What are Estimated (or Quarterly) Tax Payments?
This hybrid structure offers business owners liability protection while still allowing for pass-through taxation.
What is a Limited Liability Company (LLC)?
Business owners can claim this credit, worth 30%, for installing solar equipment at their place of business.
What is an Energy Credit?
This deduction allows a business to subtract the full purchase price of a qualifying asset in the very first year it is used.
What is a Section 179 Deduction?
To stay organized, business owners should use this to track business travel and mileage.
What is a mileage log?
This tax method allows business income to "pass through" to owners to be taxed at their individual rates rather than at the business level.
What is Pass-Through Taxation?
This type of corporation is a separate legal entity subject to its own corporate income tax, currently at a rate of 21%.
What is a C Corporation (C-Corp)?
This specific credit provides between $1,200 and $9,600 for businesses that hire individuals from certain target groups.
What is the Work Opportunity Credit?
While a company vehicle is typically depreciated, these common office items are usually "expensed" immediately.
What are Supplies?
One common audit "trigger" is accidentally mixing these two types of expenses together.
What are Personal and Business expenses?
This tax form is used to report how much a business paid a worker who is not an employee, such as a contractor.
What is a 1099 Form?
This entity requires owners to pay themselves reasonable wages and does not shield them from self-employment taxes.
What is an S Corporation (S-Corp)?
If this type of tax credit reduces your tax bill below zero, you will actually receive the remaining balance as a refund.
What is a Refundable Credit?
For the 2025 tax year, businesses can claim this percentage of "bonus" depreciation on eligible new property.
Answer: What is 40%?
This planning strategy suggests paying 100% of last year’s tax in equal quarterly installments to avoid underpayment penalties.
What is Safe Harbor?
Unlike deductions, these are dollar-for-dollar reductions that directly decrease the actual amount of tax you owe.
What are Tax Credits?
Due to 2018 audit rule changes, this multi-owner entity must now designate a specific "representative" to act on its behalf during an IRS audit.
What is a Partnership?
This state and local tax deduction is currently capped at a maximum of $10,000 for taxpayers who itemize.
What is the SALT Deduction?
To be eligible for bonus depreciation, an asset must have a specific "class life" of this many years or less.
What is 20 years?
Business owners should track and report all payments made to independent contractors that exceed this dollar amount.
What is $600?