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Tax Center Glossary

Confused about the meanings of tax-related terms? Use these definitions to help you understand the language of taxes.

Comprehensive Tax Reform
Corporate Only Tax Reform

Corporate Tax Rate

Corporation

Effective Tax Rates

Individual Federal Income Tax Rates

Marginal Tax Rates

Pass-Through Entities

Qualified Rehabilitated Building

S Corporation

Tax Credit

Tax Deduction

Taxable Income


Comprehensive Tax Reform

Tax reform that would address changes in both the corporate and individual tax rate.

Corporate Only Tax Reform

Tax reform that would only address changes in the corporate tax rate.

Corporate Tax Rate

The tax rate paid by businesses that are organized as corporations. The tax is based on the amount of profit the company makes. The amount of tax, and how it is calculated, varies depending upon the region where the company is located.

Corporation

A type of business that is taxed under subchapter C of the Internal Revenue Code. A corporation is a completely distinct tax entity that can be treated as a “person,” independent of its owners. A corporation’s owners own shares in the company, and pay taxes on the distributions, or profits, from those shares.

Effective Tax Rates

The tax rates at which a business or individual actually pay on its income after tax deductions and credits are taken into account. This is typically the rate that corresponds to an individual’s or business’ taxable income.

Individual Federal Income Tax Rates

The tax rate paid by individuals and pass-through companies. The tax is based on the amount of income the individual receives in any given year, less certain expenses and costs. The amount of tax and how it is calculated depends on the source of the income and where the individual lives.

Marginal Tax Rates

The tax rates at which a business or individual would pay on its income before tax deductions or credits are taken into account. This typically is the rate that corresponds to a worker’s gross salary, or a business’ gross profits.

Pass-Through Entities

Businesses whose tax liability flows directly to the owners of the business. Unlike corporations, businesses that get taxed both at the business and shareholder level, pass-through businesses only have one level of taxation. These businesses are often smaller businesses, and include “partnerships,” “LLCs,” “S corporations,” and “sole proprietors.”

Qualified Rehabilitated Building

See definition.

S Corporation

A type of business that is taxed under Subchapter S of the Internal Revenue Code. An S corporation differs from a regular corporation in that it is not a separate taxable entity under the code. This means that the S corporation does not pay taxes on its net income. The net profits or losses of the corporation pass through to its owners.

Tax Credit

A reduction in the amount of taxes owed.

Tax Deduction

A reduction in the amount of gross taxable income before the amount of taxes owed is determined.

Taxable Income

Gross income minus any deductions, exemptions or other adjustments for that tax year. Taxable income is used to calculate a taxpayer’s income tax payment.


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