Filling out your tax form can be like a foray into a foreign language. What’s taxable income? What’s the difference between deductions and exemptions? To help, we put together this glossary of tax terms to help you fully understand common tax terms you may encounter when filing your taxes. Visit here to learn more about tax filing.
Understanding key tax terminology is critical for managing your finances, filing tax returns, and making sound financial decisions. Here are some key tax terms to understand:
- Tax Deduction: A sum that you can deduct from your total income to reduce your taxable income, lowering the amount of income that is taxed.
- Taxable Income: The portion of your income that is subject to taxation after deductions and exemptions are applied.
- Exemption: An amount that you can deduct from your taxable income for yourself, your spouse, and each eligible dependent, lowering the amount of income that is taxed.
- Filing Status: Your marital and family situation, which determines the tax rates and deductions you are eligible for (e.g., Single, Married Filing Jointly, Head of Household).
- Tax Return: The annual document you file with the government to report your income, deductions, and tax liability is known as a tax return.
- Tax deduction: A shortened term for income that can be taxed and is frequently the result of expenses, particularly those incurred to generate additional income.
- Income Year: A 12-month period during which a person receives income for tax purposes.
- Assessment Year: is a period when the previous year’s earnings are assessed, taxes are due, and the filing of Income Tax Returns (ITRs) is done.
These are only a few of the most essential tax terms; there are many more depending on your specific tax situation. It is important that you get familiar with these terms and seek the advice of a tax professional like Shapla, an online tax filing portal. Shapla can guide you through your personal tax matters. Visit here to file your taxes in an easy, safe, and secure way.
