Glossary

The definitions in this glossary are the meanings of the terms as used in this publication. The same term used in another publication may have a slightly different meaning.

Adjusted gross income.	Gross income (defined later) minus adjustments to income (defined next). Gross income (defined later) minus adjustments to income (defined next).
Adjustments to income.	Deductions that are subtracted from gross income in figuring adjusted gross income. They include deductions for moving expenses, alimony paid, a penalty on early withdrawal of savings, and contributions to an individual retirement arrangement (IRA). Adjustments to income can be taken even if itemized deductions (defined later) are not claimed. Deductions that are subtracted from gross income in figuring adjusted gross income. They include deductions for moving expenses, alimony paid, a penalty on early withdrawal of savings, and contributions to an individual retirement arrangement (IRA). Adjustments to income can be taken even if itemized deductions (defined later) are not claimed.
Alternative minimum tax.	A tax designed to collect at least a minimum amount of tax from taxpayers who benefit from the tax laws that give special treatment to certain kinds of income and allow deductions and credits for certain kinds of expenses. A tax designed to collect at least a minimum amount of tax from taxpayers who benefit from the tax laws that give special treatment to certain kinds of income and allow deductions and credits for certain kinds of expenses.
Capital gain distribution.	An allocated amount paid to, or treated as paid to, a shareholder by a mutual fund, regulated investment company, or real estate investment trust from its net realized long-term capital gains. This amount is in addition to any ordinary dividend paid to the shareholder. You will receive a statement from the payer if this applies to you. An allocated amount paid to, or treated as paid to, a shareholder by a mutual fund, regulated investment company, or real estate investment trust from its net realized long-term capital gains. This amount is in addition to any ordinary dividend paid to the shareholder. You will receive a statement from the payer if this applies to you.
Dependent.	A person, other than the taxpayer or the taxpayer's spouse, for whom an exemption (defined later) can be claimed. You can generally claim an exemption for a dependent if the dependent: Lives with or is related to you, Is a U.S. citizen, a U.S. resident, or a resident of Canada or Mexico, Does not file a joint return, Does not have $3,100 or more of gross (total) income (does not apply to your child if under age 19 or a student under age 24), and Is supported (generally more than 50%) by you. For more information, see Exemptions for Dependents in Publication 501. A person, other than the taxpayer or the taxpayer's spouse, for whom an exemption (defined later) can be claimed. You can generally claim an exemption for a dependent if the dependent: Lives with or is related to you, Is a U.S. citizen, a U.S. resident, or a resident of Canada or Mexico, Does not file a joint return, Does not have $3,100 or more of gross (total) income (does not apply to your child if under age 19 or a student under age 24), and Is supported (generally more than 50%) by you. For more information, see Exemptions for Dependents in Publication 501.
Earned income.	Salaries, wages, tips, professional fees, and other amounts received as pay for work actually done. For purposes of determining a dependent's standard deduction, earned income also includes any part of a scholarship or fellowship grant that the dependent must include in his or her gross income. Salaries, wages, tips, professional fees, and other amounts received as pay for work actually done. For purposes of determining a dependent's standard deduction, earned income also includes any part of a scholarship or fellowship grant that the dependent must include in his or her gross income.
Exemption.	An amount ($3,100 for 2004) that can be subtracted from income in figuring how much income will be taxed. Exemptions generally are allowed for the taxpayer, the taxpayer's spouse, and qualifying dependents. An amount ($3,100 for 2004) that can be subtracted from income in figuring how much income will be taxed. Exemptions generally are allowed for the taxpayer, the taxpayer's spouse, and qualifying dependents.
Gross income.	All income from all sources (other than tax-exempt income) that must be included on your tax return. All income from all sources (other than tax-exempt income) that must be included on your tax return.
Investment income.	See Unearned income, later, and Investment income defined, earlier, under Step 1. Figuring the Child's Net Investment Income (Form 8615, Part I). See Unearned income, later, and Investment income defined, earlier, under Step 1. Figuring the Child's Net Investment Income (Form 8615, Part I).
Itemized deductions.	Deductions allowed on Schedule A (Form 1040) for medical and dental expenses, taxes, interest, charitable contributions, casualty and theft losses, and miscellaneous deductions. They are subtracted from adjusted gross income in figuring taxable income. Itemized deductions cannot be claimed if the standard deduction is chosen. Deductions allowed on Schedule A (Form 1040) for medical and dental expenses, taxes, interest, charitable contributions, casualty and theft losses, and miscellaneous deductions. They are subtracted from adjusted gross income in figuring taxable income. Itemized deductions cannot be claimed if the standard deduction is chosen.
Net capital gain.	The excess of net long-term capital gain over any net short-term capital loss. For 2004, this is the smaller of the gain on line 15 or the gain on line 16 of Schedule D (Form 1040), Capital Gains and Losses. If Schedule D is not required, net capital gain is the amount of capital gain distributions on Form 1040, line 13, or Form 1040A, line 10. The excess of net long-term capital gain over any net short-term capital loss. For 2004, this is the smaller of the gain on line 15 or the gain on line 16 of Schedule D (Form 1040), Capital Gains and Losses. If Schedule D is not required, net capital gain is the amount of capital gain distributions on Form 1040, line 13, or Form 1040A, line 10.
Net investment income.	The total of all investment income (other than tax-exempt income) reduced by the sum of the following: adjustments to income related to the investment income, plus the larger of: $800 plus itemized deductions directly connected with producing the investment income, or $1,600. The total of all investment income (other than tax-exempt income) reduced by the sum of the following: adjustments to income related to the investment income, plus the larger of: $800 plus itemized deductions directly connected with producing the investment income, or $1,600.
Qualified dividends.	Dividends eligible for the lower tax rates that apply to a net capital gain. They are reported to you in box 1b of Form 1099-DIV. On your tax return, you report them on line 9b of Form 1040 or Form 1040A. For more information, see Publication 550. Dividends eligible for the lower tax rates that apply to a net capital gain. They are reported to you in box 1b of Form 1099-DIV. On your tax return, you report them on line 9b of Form 1040 or Form 1040A. For more information, see Publication 550.
Standard deduction.	An amount (based on filing status, age, and blindness) that can be subtracted from adjusted gross income in figuring taxable income. The standard deduction of a dependent is subject to a limit based on earned income. The standard deduction is not used if itemized deductions are claimed. An amount (based on filing status, age, and blindness) that can be subtracted from adjusted gross income in figuring taxable income. The standard deduction of a dependent is subject to a limit based on earned income. The standard deduction is not used if itemized deductions are claimed.
Tax year.	The time period covered by a tax return. Usually this is January 1 to December 31, a calendar year, but taxpayers can elect a fiscal tax year with different beginning and ending dates. The time period covered by a tax return. Usually this is January 1 to December 31, a calendar year, but taxpayers can elect a fiscal tax year with different beginning and ending dates.
Taxable income.	Gross income minus any adjustments to income, any allowable exemptions, and either itemized deductions or the standard deduction. Gross income minus any adjustments to income, any allowable exemptions, and either itemized deductions or the standard deduction.
Unearned income.	Income other than earned income. This is investment-type income and 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. Income other than earned income. This is investment-type income and 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.
Unrecaptured section 1250 gain.	Generally, any part of your net capital gain from selling section 1250 property (real property) that is due to depreciation. For details, see Publication 550. Generally, any part of your net capital gain from selling section 1250 property (real property) that is due to depreciation. For details, see Publication 550.
28% rate gain.	Gain from the sale of collectibles and half of the gain from the sale of qualified small business stock held more than 5 years. For details, see the instructions for Schedule D (Form 1040). Gain from the sale of collectibles and half of the gain from the sale of qualified small business stock held more than 5 years. For details, see the instructions for Schedule D (Form 1040).