Tax Concepts

Above-the-Line Deduction An above-the-line deduction is a deduction taken in arriving at adjusted gross income. Accountable Plan An accountable plan is a reimbursement arrangement that lets a business repay employees or owner-employees for qualifying business expenses without treating the reimbursement as taxable wages. Actual Vehicle Expense Actual vehicle expense is the method of deducting the business-use share of actual vehicle costs rather than using the standard mileage rate. Additional Medicare Tax Additional Medicare tax is the extra Medicare tax imposed on certain higher levels of earned income. Adjusted Gross Income Adjusted gross income, or AGI, is your gross income minus certain above-the-line adjustments allowed by tax law. Alternative Depreciation System The alternative depreciation system, or ADS, is the depreciation system used in situations where the rules require or permit a different recovery method than the regular system. Alternative Minimum Tax Alternative minimum tax, or AMT, is a parallel tax calculation designed to limit certain tax benefits for higher-income taxpayers in specific situations. Apportionment Apportionment is the process states use to divide a multistate business's income for state tax purposes. At-Risk Rules At-risk rules limit losses to the amount a taxpayer has economically at risk in the activity, subject to the specific rules. Backup Withholding Backup withholding is a required tax withholding that can apply when certain payees do not provide a correct taxpayer ID or trigger other IRS withholding rules. Basis Adjustment A basis adjustment is any increase or decrease to tax basis caused by later events under the tax rules. Below-the-Line Deduction A below-the-line deduction is a deduction taken after adjusted gross income in the tax calculation.