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Standard Deduction

A fixed dollar amount that taxpayers can subtract from their income before calculating their federal income tax, used instead of listing individual deductible expenses.

Earned Income Tax Credit (EITC)

A refundable tax credit for low-to-moderate-income working individuals and families, designed to help offset taxes, support working families, and lift people out of poverty.

Taxable Year

The period for which a person files an income tax return, typically a calendar year (January 1 to December 31) for individuals.

Internal Revenue Code of 1986

The primary federal law that governs U.S. tax laws, administered by the Internal Revenue Service (IRS).

Refundable Tax Credit

A tax credit that can reduce a person's tax liability below zero, meaning if the credit is more than the tax owed, the taxpayer receives the difference back as a refund.

Phaseout

The process by which the amount of a tax credit or deduction gradually decreases as a taxpayer's income increases, eventually disappearing entirely for higher earners.

Marginal Tax Rate

The tax rate applied to the last dollar of income earned. The U.S. has a progressive tax system, meaning higher income brackets are taxed at higher marginal rates.