Tag Archives: Tax Terms

Prepaid Expenses

Prepaid Expenses

The Prepaid Expenses are.

amounts that are paid before the period they cover. Such expenses often include insurance and rent. Prepaid expenses are not deductible until the appropriate period.

See also other Tax Terms and Definitions in U.S.A.

economic performance rule.

Description and Definition of Prepaid Expenses

Amounts paid in advance to a vendor or creditor for goods and services. Prepaid expenses are generally treated as a current asset because payment was made in advance and the goods or services are have not been delivered.

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Medicare Tax

Medicare Tax

Medicare Tax means:
the hospital insurance portion of the tax assessed on compensation and self-employment earnings under the Federal Insurance Contributions Act. Medicare tax is an amount paid by individuals during the period in which they earn wages for purposes of providing them with benefits when they retire. Medical benefits are made available to certain individuals when they reach age 65. Workers, retired workers, and the spouses of workers and retired workers are eligible to receive Medicare benefits upon reaching age 65. Medicare tax is also deducted from social security benefits. In 1993 the Medicare tax was 2.9% of earnings up to $135,000. After 1993, all wages and self-employ- ment income are subject to the 2.9% tax. Used to provide medical benefits for certain individuals when they reach age 65. Workers, retired workers, and the spouses of workers and retired workers are eligible to receive Medicare benefits upon reaching age 65. An employer is required to withhold half of the tax (1.45%) from employees' wages and also to make a matching contribution of the other half of the tax. Employer-withheld and matching taxes are deposited at regular intervals with the U.S. Internal Revenue Service. Self-employed individuals include the 2.9% tax with their quarterly estimated tax payments.

The portion of the Social Security tax – 1.45% for employees and 2.9% for self-employed taxpayers – that pays for Medicare. Although the part of the tax that pays for retirement benefits stops at $106,800 in 2010 and 2011, the Medicare portion applies to all wages and self-employment income.

Medicare Tax Issue

You may find information about Medicare Tax in this Tax Platform of the American Encyclopedia of Law.

Gift

Gift

Gift means:
the voluntary transfer of property made without financial consideration; that is, no value is received in return. Each donor may give $10,000 annually to each donee without affecting the $600,000 lifetime exemption of property passing from an estate. Married persons may transfer unlimited amounts to their spouses as a gift during their lifetime. In federal tax law, a gift is excluded from the gross income of the recipient, but the transferor may be subject to the unified estate and gift tax. Nondeductible transfers to political organizations are exempt from the federal gift tax.

See also other Tax Terms and Definitions in U.S.A.

business gift.

United States Gift Issue

You may find information about United States Gift in this Tax Platform of the American Encyclopedia of Law.

Marketable Securities

Marketable Securities

Marketable Securities means:
securities that are easily sold. On a corporation's balance sheet, they are assets that can be readily converted into cash for example, government securities, banker's acceptances, and commercial paper. See: Quoted securities.

Description and Definition of Marketable Securities

Stocks, bonds, and other securities that are easily sold. A marketable security has a readily determinable fair market value and can be converted into cash at any time.

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Dependent

Dependent

Dependent means:
any person with respect to whom a taxpayer can claim a dependency exemption; defined by the Internal Revenue Code as any individual supported by the taxpayer who is related to the taxpayer in specified ways or who makes his principal abode in the taxpayer’s household. A qualifying child or qualifying relative, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption. Six tests must be met:

  • support
  • relationship or household membership the entire year
  • gross income
  • joint return
  • citizenship or residency
  • legal relationship.

The amount of the dependency exemption is indexed for inflation each year (e.g., in 1994 the amount was $2,450). Former IRC (check if this IRC provision is current here) §152. For Dependent Agent, see Agency.

In other words, someone the taxpayer support and can claim a dependency exemption on his or her tax return. For each dependent the taxpayer claim the taxpayer subtract an exemption amount from his or her taxable income.

Dependent Tax Issues

Adopting a Child

Learn about the Adopting a Child issue in this American Tax Encyclopedia.

Adoption Taxpayer Identification Number (ATIN)

Learn about the Adoption Taxpayer Identification Number (ATIN) issue in this American Tax Encyclopedia.

Adoption Tax Credit

Learn about the Adoption Tax Credit issue in this American Tax Encyclopedia.

American Opportunity Tax Credit

Learn about the American Opportunity Tax Credit issue in this American Tax Encyclopedia.

Child and Dependant Care Tax Credit

Learn about the Child and Dependant Care Tax Credit issue in this American Tax Encyclopedia.

Child Tax Credit

Learn about the Child Tax Credit issue in this American Tax Encyclopedia.

Children’s Tax Returns and “Kiddie Tax”

Learn about the Children’s Tax Returns and “Kiddie Tax” issue in this American Tax Encyclopedia.

Child Support Payment Tax Deductions

Learn about the Child Support Payment Tax Deductions issue in this American Tax Encyclopedia.

Earned Income Tax Credit

Learn about the Earned Income Tax Credit issue in this American Tax Encyclopedia.

Education IRAs

Learn about the Education IRAs issue in this American Tax Encyclopedia.

Lifetime Learning Tax Credit

Learn about the Lifetime Learning Tax Credit issue in this American Tax Encyclopedia.

Qualified Tuition Programs

Learn about the Qualified Tuition Programs issue in this American Tax Encyclopedia.

Student Loan Interest Tax Deductions

Learn about the Student Loan Interest Tax Deductions issue in this American Tax Encyclopedia.

Student Tax Returns

Learn about the Student Tax Returns issue in this American Tax Encyclopedia.

US Savings Bond Tuition Plans

Learn about the US Savings Bond Tuition Plans issue in this American Tax Encyclopedia.

Description and Definition of Dependent

A person who relies on someone else for financial support. You can claim a dependency exemption on your tax return for each dependent who qualifies. To qualify the dependent must meet all five of the following tests:

Relationship or member of household test

Citizenship test

Joint return test

Gross income test

Support test

Each dependent under age 17 also qualifies his or her parent for a $500 tax credit.

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Easement

Easement

The Easement are.

payment received for granting an easement (specific limited use or enjoyment) is usually considered to be from the sale of an interest in real property. The amount received reduces the basis of the affected part of the property. If the amount received exceeds the basis of the part of the property affected by the easement, the basis is reduced to zero, and the excess must be treated as a recognized gain.

Conservation Easement Issue

You may find information about Conservation Easement in this Tax Platform of the American Encyclopedia of Law.

Asset

Asset

Asset means:
anything owned that has value; any interest in real property or personal property that can be used for payment of debts. Assets are listed on Schedule L of the corporate tax return.

See Corporate Tax in the U.S. Legal Encyclopedia and Corporate Tax in the International Legal Encyclopedia.

Description and Definition of Asset

Anything owned by an individual or a business, which has cash, commercial, or exchange value. Assets may consist of specific property or claims against others.

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Excess Accelerated Depreciation

Excess Accelerated Depreciation

Excess Accelerated Depreciation means:
the accumulated difference between the accelerated depreciation claimed for tax purposes and what the straight-line depreciation would have been. Generally, excess accelerated depreciation is recaptured (taxed) as ordinary income upon a sale, instead of receiving more favorable capital gains treatment. See also depreciation recapture.

Note: Since the Tax Reform Act of 1986, the significance of accelerated depreciation has diminished because only straight-line depreciation may be claimed for real estate acquired since then.

See also Capital Gain in the American Legal Encyclopedia and Capital Gain in the World Legal Encyclopedia.

See Depreciation in the United States Encyclopedia of Law and Depreciation in the World Encyclopedia of Law.

Description and Definition of Excess Accelerated Depreciation

The difference between the total depreciation you have taken since you acquired the property and the depreciation you would have taken if you had used the straight-line depreciation method. This is calculated upon the sale or disposition of property.

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Miscellaneous Itemized Deductions

Miscellaneous Itemized Deductions

Miscellaneous Itemized Deductions means:
job expenses and other miscellaneous expenses that are deductible by individual taxpayers but are not categorizable as medical expenses, taxes, interest, charitable contributions, casualty and theft losses, or moving expenses. Most miscellaneous itemized deductions are subject to a 2% floor (a reduction of the total deduction by 2% of Adjusted Gross Income). Examples of these are:

• union or professional dues.

• employment agency fees.

• unreimbursed job travel expenses.

• job-related education.

• uniform expenses.

• investment expenses.

• tax return preparation fees.

• safe deposit box fees.

• repayment under the claim-of-right doctrine of $3,000 or less.

• expenses incurred in the production of income or the preservation of property (also called Section 212 expenses).

Miscellaneous itemized deductions that are not subject to a 2% floor include:

• rent or royalty expenses.

• federal estate tax deduction.

• gambling losses to the extent of gambling winnings.

• repayment under claim of right in excess of $3,000.

• impairment-related work expenses of a disabled person. IRC (check if this IRC provision is current here) §67(b).

Description and Definition of Miscellaneous Itemized Deductions

These are generally itemized deductions for job, investment, and other miscellaneous expenses that are only deductible to the extent that they exceed 2 percent of your adjusted gross income.

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Investment Interest Expense

Investment Interest Expense

Investment Interest Expense means (see more about entries related to interest in the U.S. here)

interest paid to carry portfolio investments such as bonds, stocks, and undeveloped land. (Investment interest is Interest paid on loans used for investment purposes, such as to buy stock on margin).Tax deductions by non-corporate taxpayers for investment interest expense are limited to the income received from the investment, such as dividends, interest, and capital gains. However, beginning in 1993, capital gains cannot be used for this purpose unless the taxpayer reduces the amount of capital gains that is eligible for the 28% maximum capital gains rate.

Investment interest

.

The taxpayer can deduct this interest on Schedule A if you itemize, up to the amount of investment income (not including capital gains or dividends that qualify for the 0% or 15% rates) in the taxpayer report.

See also Capital Gain in the American Legal Encyclopedia and Capital Gain in the World Legal Encyclopedia.

See Corporate Tax in the U.S. Legal Encyclopedia and Corporate Tax in the International Legal Encyclopedia.

See Dividend in the American Legal Encyclopedia and Dividend in the World Legal Encyclopedia.

Description and Definition of Investment Interest Expense

Interest paid on loans used for investment purposes such as margin loans to buy stock – but not including interest expense from a passive activity. The investment interest expense deduction is limited to the income from investments.

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