Learning Tax Vocabulary Is Key To Understanding Your Finances

PennyGem’s Elizabeth Keatinge tells us about some tax vocabulary we should know.

Transcript

00:00 AGI, standard deduction, total income.

00:07 Do you know what these words mean?

00:09 Being up on your tax terminology can help you become a savvier taxpayer.

00:13 As Money Talks News defines it, AGI, or adjusted gross income, is your total income minus certain

00:20 adjustments.

00:21 These can be things like tax deductions for retirement account contributions, interest

00:25 paid on student loans, and spousal support.

00:28 Your total income, or gross income, is the total amount of your income that must be reported

00:33 on your federal tax return before any adjustments or deductions are made.

00:38 A flat amount that reduces your taxable income, that's a standard deduction.

00:42 It's $25,100 for married filing jointly, $18,800 for head of household, and $12,500 for married

00:51 filing separately.

00:52 As Bankrate highlights, tax credits reduce the amount of your total tax bill.

00:57 Things like a federal government credit for the cost of purchasing solar panels for your

01:01 home.

01:02 Do you know what tax bracket you're in?

01:04 Progressive taxation is the system in which higher tax rates apply to higher income levels.

01:10 It ranges from 10% to 39.6%.

01:14 An exemption is an amount the IRS allows you to deduct for all the people who count on

01:19 your income.

01:20 Is your child an exemption?

01:22 If he or she counts on your income, then yes they are, even if they're well into the teenage

01:27 years.

01:28 So now that you're up on your tax lingo, you'll be much more savvy when calculating how much

01:33 you need to pay Uncle Sam this year.

01:35 (upbeat music)