1. TDS

Tax deducted at the source is known as TDS. It is mandatory for businesses to pay taxes to the government and avoid tax evasion. You can make instant tds payments with the RazorpayX TDS payment Tool to avoid penalties and errors.

2. Tax Credits

There are various tax credits, but not everyone will qualify. With these credits, you can reduce the total amount of taxes you owe to the government. The biggest difference between tax credits and tax deductions is in the way they are calculated. A good amount of tax credits can turn a negative tax balance into a positive refund.

3. Itemized Deductions

To reach a smaller income amount, expenses are deducted from your AGI. This is calculated in your tax bill but has strict limits attached to each deduction. Guidelines for itemized deductions change every year, so it’s important to check online for any revisions. 

4. Progressive Taxation

As income levels increase, higher tax rates are appointed to make up for the difference. The government reassesses this amount for each tax season based on the state of the country.

5. AGI

Adjusted gross income is known as AGI in the tax world. It is all of your income added, and includes dividends, capital gains, wages and interest. The only thing AGI doesn’t touch are a few business expenses, and contributions to an IRA.

6. Withholding

When you receive a paycheck, there are several items taken out automatically. This falls under withholding, and is credited to your account once taxes are filed. Dividends and interest are other types of income that can be considered for withholding.

7. Exemption

Exemptions can be claimed on yourself, a spouse or a dependent. Each claimed exemption is worth a certain amount and will be subtracted from your income. This is one of the most reliable ways to lower your income without any mistakes or penalties.

8. Taxable Income

Taxable income is your overall income after being reduced by exemptions, adjustments, and deductions. With this final amount, you’ll have an estimate of the amount of taxes owed to the government.

9. Standard Deductions

Your filing status determines the standard deduction on every return. It is a fixed amount but changes each year based on inflation. Before diving deep into a tax return, choosing the type of deduction is necessary to get optimal results.

10. Tax Deductions

Tax deductions are probably one of the most familiar terms if you do personal taxes. Certain expenses can be subtracted from your AGI to get your true taxable income. Like a domino effect, lowering your taxable income also lowers the amount of any money owed.

Plan Ahead

Taxes make small changes year to year that aren’t always convenient. By keeping up with the language, you’ll always understand how these changes affect your income. Tax season is always around the corner, so stay consistent with your willingness to learn financial vocabulary.