Married filing separately

Filing status for taxpayers who are married to each other or live together in a common law marriage and report their own incomes and deductions on separate returns. You are married and both you and your spouse agree to file a joint return. On a joint return, you report your combined income and deduct your combined allowable expenses.

Miscellaneous itemized deductions

Misc. Itemized deductions are a special category of itemized deductions that includes such expenses as professional dues, tax return preparation fees, job-hunting costs, unreimbursed employee business expenses, and certain investment expenses. Such expenses are deductible only to the extent they exceed 2 percent of adjusted gross income.

Net operating losses (NOL)

If a taxpayer has deductions for the year are more than income for the year, (this means thatline 41 of your Form 1040 is a negative number), you may have a net operating loss (NOL). You can use an NOL by deducting it from your income in another year or years.

Nonrefundable credit

A nonrefundable tax credit occurs when the amount of a credit is greater than the tax owed. In contrast to a refundable credit, taxpayers can only reduce their tax to zero. This means that they cannot receive a “refund” for any excess nonrefundable credit.

Permanent and total disability

There are certain tax benefits when a person is considered permanently and totally disabled. This occurs if  they are unable to engage in any substantial gainful activity due to a physical or mental impairment. In addition, this impairment must be one that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months. The taxpayer generally must provide the IRS a physician’s statement documenting this condition and be able to support it one audit.

Standard deduction

The individual taxpayer can either itemize deductions or take the standard deduction. The standard deduction is a tax deduction that reduces the amount of income on which you are taxed. You cannot take the standard deduction if you claim itemized deductions. Your standard deduction consists of the basic standard deduction amount based on your filing status and additional standard deduction for different circumstances that a taxpayer might be under.

Limitations exist on the amount of the standard deduction of a taxpayer who is another taxpayer’s dependent.

Tax-exempt interest

Tax exempt interest paid on bonds issued by states or municipalities that is tax-free for federal income tax purposes. Although you must report this income on your return, it is not taxed. The AMT may affect which interested is considered tax free.

unearned income

Unearned income is income other than earned income. This is investment-type income is also referred to as just investment income. It generally includes interest, dividends, and capital gains. Distributions of interest, dividends, capital gains, and other unearned income from a trust are also unearned income to a beneficiary of the trust.


Wash Sale

A wash sale is the sale of stocks, bonds or mutual fund shares for a loss when, within 30 days before or after that sale, you buy the same or substantially identical securities. If a taxpayer performs such a transaction, the loss will disallowed by operation of tax law.

Withholding Tax

Withholding is the amount held back from your wages each payday to pay your income and Social Security taxes for the year. This money is deposited for the government. It will be credited against the employees’ tax liability when they file their returns. Employers withhold money for federal income taxes, federal social security taxes, and state and local income taxes in some states and localities.