A class of employee that is permitted to deduct work-related expenses on Schedule C instead of Schedule A. Statutory employees are usually salespeople or other employees who work on commission.Statutory employees are independent contractors under the IRS's common-law rules. Statutory employees are granted a greater tax deduction for their business expenses than other employees, because Schedule C expenses are not subject to the 2% adjusted-gross-income threshold like expenses on Schedule A.
Tax levied on income at the state level. State income taxes have their own set of deductions and credits that may be awarded for certain activities, such as contributing to a state-sponsored 529 plan. Taxpayers who itemized deductions on their federal returns may deduct state taxes paid on Schedule A. Not all states assess income tax. Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have no state tax of any kind. New Hampshire and Tennessee levy tax on dividend and interest income only. Of course, the overall level of taxation varies from one state to another.
A set rate the IRS allows for each mile driven by the taxpayer for business, charitable, medical or moving purposes. The standard mileage rate can be taken in lieu of actual expenses incurred when calculating deductible automobile expenses related to any of the four activities above. Although taxpayers have the choice of deducting either actual expenses or taking the standard mileage rate, the latter is usually chosen because it is not only simpler, but often provides a greater deduction.The standard mileage rates are based upon information compiled annually by Runzheimer International, an independent contractor to the IRS.
A base amount of income that is not subject to tax and that can be used to reduce a taxpayer's adjusted gross income (AGI). A standard deduction can only be used if the taxpayer does not choose the itemized deduction method of calculating taxable income. The amount of the standard deduction is based on a taxpayer's filing status, age and whether he or she is disabled or claimed as a dependent on someone else's tax return. The biggest reason taxpayers use standard instead of itemized deductions is that taxpayers don't have to keep track of every possible tax deductible expense throughout the year. Plus, many people find the standard deduction amount to be fairly generous and usually greater than the total they could reach if they added up all of their tax-related expenses separately. The standard amounts are adjusted for inflation each year.
A type of income trust that holds publicly traded investments, has at least one non-portfolio property, and is resident in Canada. SIFT trusts are a common type of business structure in Canada. The trusts were intended to provide tax advantages for non-commercial investments, but became widely used by commercial businesses. The United States and Australia formerly had similar business entities. The Canadian government decided that the tax advantages businesses had by using SIFT trusts as opposed to a corporate structure were "not appropriate", and in October 2006 enacted a tax fairness plan that included a provision for taxing distributions on publicly traded income trusts. The provisions went into effect for preexisting income trusts beginning January 1, 2011, and for new income trusts (after October 2006) beginning January 1, 2007. Many preexisting SIFT trusts decided to convert to a corporate ownership structure because of these changes to the tax law.
A security that is so similar to another that the Internal Revenue Service (IRS) does not recognize a difference between the two. Substantially identical securities can include both new and old securities issued by a corporation that has undergone reorganization. Convertible securities and common stock of the same corporation can also fall into this category if the market and conversion prices are similar. Substantially identical securities cannot be used in tax swaps to create capital losses. Securities used in swaps must be similar but not substantially identical; if they are, the IRS will consider the transaction to be a wash sale, and will disallow it.
A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public. Politics play an important part in subsidization. In general, the left is more in favor of having subsidized industries, while the right feels that industry should stand on its own without public funds. There are many forms of subsidies given out by the government, including welfare payments, housing loans, student loans and farm subsidies. For example, if a domestic industry, like farming, is struggling to survive in a highly competitive international industry with low prices, a government may give cash subsidies to farms so that they can sell at the low market price but still achieve financial gain.If a subsidy is given out, the government is said to subsidize that group/industry.
An adjustment to an individual's income for any interest paid on higher education loans during the tax year. only payments made within the first 60 months of finishing school qualify for the deduction, which is usually limited to a certain amount.
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