Glossary
Tax & accounting glossary.
Plain-English definitions for the terms you'll see across our site, your tax return, and your business.
- Adjusted Gross Income (AGI)
- Your total income minus specific above-the-line deductions. AGI determines eligibility for many credits, deductions, and phaseouts.
- Bonus Depreciation
- An accelerated depreciation deduction allowing businesses to expense a large percentage of qualifying assets in the year they are placed in service.
- Cost Segregation
- An engineering-based study that reclassifies real estate components into shorter-life property, accelerating depreciation deductions.
- Defined Benefit Plan
- A retirement plan that promises a specific benefit at retirement; contributions are actuarially determined and can far exceed 401(k) limits.
- Enrolled Agent (EA)
- A federally licensed tax practitioner with unlimited rights to represent taxpayers before the IRS.
- Estimated Tax Payments
- Quarterly payments made to the IRS and state on income not subject to withholding, to avoid underpayment penalties.
- Fractional CFO
- An outsourced senior finance leader engaged part-time to provide forecasting, KPI reporting, and strategic financial guidance.
- K-1
- A tax form issued by partnerships, S-corps, and trusts reporting each owner's share of income, deductions, and credits.
- NIIT (Net Investment Income Tax)
- A 3.8% tax on investment income for high-income taxpayers above modified AGI thresholds.
- Offer in Compromise
- An IRS program allowing taxpayers to settle tax debt for less than the full amount owed when collection is unlikely.
- Pass-Through Entity
- A business structure (LLC, S-corp, partnership) where profits flow to owners' personal returns rather than being taxed at the entity level.
- Qualified Business Income (QBI) Deduction
- A deduction of up to 20% of qualified pass-through business income, subject to thresholds and trade-or-business limits.
- Real Estate Professional Status (REPS)
- An IRS designation allowing rental losses to offset non-passive income, requiring 750+ hours and majority of personal services in real estate.
- Reasonable Compensation
- The wage an S-corp owner-employee must pay themselves before taking distributions, based on what a third party would pay for similar services.
- S Corporation
- A pass-through entity election that can reduce self-employment tax on profits above a reasonable salary.
- Section 1031 Exchange
- A tax-deferred swap of like-kind investment real estate, allowing gain recognition to be postponed.
- Solo 401(k)
- A retirement plan for self-employed individuals with no employees, allowing both employee and employer contributions.
- Will
- A legal document that distributes your assets at death, names an executor, and (most importantly for parents) designates a guardian for minor children.
- Revocable Living Trust
- A trust you create during your lifetime and can change or revoke. Assets titled in the trust avoid probate and can be managed without interruption if you become incapacitated.
- Irrevocable Trust
- A trust that cannot be easily changed once established. Used for estate-tax planning, asset protection, and special-needs planning.
- Power of Attorney (POA)
- A document authorizing another person to act on your behalf — financial POAs cover money and property; healthcare POAs cover medical decisions.
- Healthcare Directive / Living Will
- A document stating your wishes for end-of-life and serious-illness care and naming a healthcare proxy to speak for you.
- HIPAA Authorization
- A document allowing named individuals to receive your protected health information from medical providers.
- Guardian
- The person legally responsible for raising a minor child — and often for managing money on their behalf — if both parents are gone.
- Executor
- The person named in a will to administer the estate: gather assets, pay debts and taxes, and distribute what remains to beneficiaries.
- Trustee
- The person or institution responsible for managing trust assets according to the trust document and in the interest of the beneficiaries.
- Beneficiary Designation
- The instruction on a retirement account, life insurance policy, or transfer-on-death registration naming who receives the asset. Beneficiary designations override your will.
- Probate
- The court-supervised process of validating a will, paying debts and taxes, and distributing assets. Probate is typically public, can take months, and may cost a percentage of the estate.
- Estate Tax
- A federal (and sometimes state) tax on the transfer of assets at death above an exemption amount. Most estates fall below the federal exemption but planning matters as exemptions can change.
- Gift Tax
- A federal tax on transfers of property during life above an annual exclusion. Used in coordination with estate-tax planning to transfer wealth efficiently.
- Charitable Remainder Trust (CRT)
- An irrevocable trust that pays income to you (or beneficiaries) for a term, with the remainder going to charity — providing a current charitable deduction and potential capital-gains deferral.
- Special Needs Trust
- A trust designed to hold assets for a beneficiary with a disability without disqualifying them from means-tested public benefits like Medicaid and SSI.