About this Flash Card Set
16 Cards
by daniel_carter
Finally understand your taxes: gross vs. net pay, W-2 vs. 1099, deductions vs. credits, marginal tax brackets, and more. Plain-English basics for your first job and beyond.
Front
Gross income vs. net income
Back
Gross is what you earn before deductions; net (take-home) is what's left after taxes and other withholdings.
Tags
Front
W-2
Back
The form an employer sends showing your annual wages and the taxes withheld. Used to file your return.
Tags
Front
1099
Back
A form reporting income you earned as a contractor or from non-employer sources. No taxes are withheld, so you may owe at filing.
Tags
Front
Withholding
Back
The portion of each paycheck your employer sends to the government toward your income taxes in advance.
Tags
Front
Tax deduction
Back
An amount subtracted from your taxable income, lowering the income you're taxed on (e.g., the standard deduction).
Tags
Front
Tax credit
Back
A dollar-for-dollar reduction of the tax you owe. Credits are more valuable than deductions of the same amount.
Tags
Front
Deduction vs. credit
Back
A deduction reduces taxable income; a credit reduces the tax bill directly. A $1,000 credit saves you $1,000; a $1,000 deduction saves only your tax rate times $1,000.
Tags
Front
Marginal tax bracket
Back
The rate applied to your last dollar of income. The U.S. uses progressive brackets — higher income is taxed at higher rates.
Tags
Front
Progressive tax myth
Back
Moving into a higher bracket does NOT tax all your income at that rate — only the income above each bracket's threshold is taxed at the higher rate.
Tags
Front
Effective tax rate
Back
The average rate you actually pay across all your income — always lower than your top marginal rate.
Tags
Front
Standard vs. itemized deduction
Back
You take whichever is larger: a flat standard deduction, or the sum of specific itemized deductions (like mortgage interest and charitable gifts).
Tags
Front
Taxable income
Back
Your income after deductions — the number your tax is actually calculated on.
Tags
Front
Tax refund
Back
Money returned to you when you had more withheld than you owed. A big refund means you gave the government an interest-free loan.
Tags
Front
FICA taxes
Back
Payroll taxes for Social Security and Medicare, split between you and your employer.
Tags
Front
Filing status
Back
Your category for tax purposes (single, married filing jointly, head of household, etc.), which affects your brackets and deduction.
Tags
Front
Adjusted Gross Income (AGI)
Back
Your gross income minus certain adjustments. Many tax benefits phase in or out based on your AGI.
Tags