Finances and Taxes

The Earned Income Tax Credit(EITC), sometimes called the EIC is a refundable tax credit for eligible low- and moderate-income workers. It’s an anti-poverty tax benefit.

What are child tax credits Child Tax Credits (CTCs) is a federal tax benefit that provides financial support for American taxpayers with dependent children under […]

Modified adjusted gross income (MAGI) is an individual’s adjusted gross income (AGI) adjusted for tax-exempt interest income and certain deductions added back in.

401k is an employer-sponsored tax-advantaged retirement account. Workers make direct contributions from their paychecks (before IRS tax withholding) with Employers commonly making a matching contribution. Since the 401k plan confers tax advantages and is meant for retirement, IRS has placed restrictions on 401k withdrawals. Penalty-free funds can be withdrawn at age 59 ½ (early withdrawal attracts a 10% penalty).

Tax refunds refer to any reimbursements made to a taxpayer by the federal (or state) government for excess taxes paid. It’s often caused by employers withholding too much from an employee’s paycheck.

Adjusted Gross Income, abbreviated as AGI is simply your total or gross income adjusted for specific “above-the-line” deductions to determine which tax benefits a taxpayer is eligible for. The Adjusted Gross Income may include wages, salaries, interest, dividends, retirement income, Social Security benefits, capital gains, business, and other sources.

Not all US citizens are required to file a federal income tax return (though not required doesn’t necessarily mean you shouldn’t). You are not required to file a tax return if your income is below a certain threshold based on your age and status (there is no set minimum income for filing a return, it all depends on filing status and age).

Federal tax Form 1040, also known as the “U.S. Individual Income Tax Return,” is the standard federal income tax form used by American taxpayers to file their annual income tax returns. It’s the mother of all tax forms as it’s used to report a taxpayer’s tax details to the Internal Revenue Service (IRS).

An itemized deduction is any certain expense (on tax-privileged items) that a taxpayer is allowed to deduct against their Adjusted Gross Income (AGI) during a tax year. It’s essentially a list of expenses you can use to reduce your taxable income.

The standard deduction is a fixed dollar amount The Internal Revenue Service (IRS) allows taxpayers to deduct from their taxable income ( adjusted gross income or just AGI) hence reducing the overall tax bill.