Depreciation

Is a deduction allowed for the reasonable wearing out of assets used in business or held for the production of income. ex. machinery,

Capital Improvement

An improvement made to extend the useful life of a property or add to its value. Major repair such as the replacement of a roof are considered to be capital improvement. The cost of capital improvements to business property must be capitalized and may be depreciated.

Capital Gain

The gain from the sale or exchange of a capital assets; such as stock or real estate. The gain is the difference between a selling price exceeds the purchase price of any investment such as property (real estate), stock or bonds, and goodwill.

Basis of Stock

The cost basis of any stock or investment it goes to the original value of an asset purchased, If the stock is received as a gift, basis is generally from the previous owner or the fair market value when received. See also in publication 551 

Adjustment to Income

An expense which may be deducted even if the taxpayer does not itemize deductions. Adjustment to income are subtracted from gross income to arrive at adjusted gross income.

Taxpayer Child

Includes the taxpayer's natural child, step-child, or a child placed for legal adoption regardless of when the child came to live with the taxpayer; also, any other child whom the taxpayer cared for as his own child for the entire year unless the child's natural or adoptive parents provided over half of the child support.

Support

The total amount provided on behalf of an individual. Support includes food, lodging, and other necessities as well as recreation and other nonessential expenditures. Support is not limited to necessities and can be as lavish as the taxpayer can afford.

Recovery of Cost

The amount that was paid for income received, usually a factor only in income from sale of items purchased for resale, income from sales of property, and income from pensions or annuities. The portion of income that represents recovery of cost is not taxable.

Principal Place of Abode

(Principal Residence) The place that an individual considered to be his permanent home. A person's abode does not change when he is temporarily absent due to illness, school, military services, etc., as long as his living area is maintained and he can reasonably expected to return home after the temporary absence.

Physical Custody

The taxpayer with whom a child lives is considered to have physical custody.

Noncustodial Parent

The parent who does not have physical custody of the child.

Full Time Student

An individual who is enrolled in a school for the number of hours or courses considered by the school to be full-time. School includes elementary and secondary schools, post-secondary colleges, and technical and trade schools. It does includes on the job training, correspondence schools, or night school. However, a student will not be disqualified by night classes that are part of a full-time course of study.

Foster Child

For the tax purposes, a child other than a natural or adopted child, who live with the taxpayer for the entire year and whom the taxpayer cared for as his own child. The term foster child does not include a child place with the taxpayer by a child placing agency that makes payments to the taxpayer as a foster parent.

Exemption

An amount (3,800 for 2012) allowed by laws as a reduction of income that would otherwise be taxed. there are two kinds of exemptions; Personal, and dependency. see Form Instruction 1040 

Dependent

An individual who qualifies to be claimed as a dependent on another person's income tax return. To be claimed as a dependent, a person must meet five tests.

Custodian Parent

The parents with whom a child lives for more than 6 months. A custodial parent is also considered the primary care parent.

What is Tax Supplement?

Local tax imposed be a lower government unit (such as a municipality) on the same tax base over which a higher governmental unit (state or federal government) has already imposed a similar tax.

What is Tax Sheltered Income?

Tax-deferred or tax-exempt earnings.

What is Tax Sink?

Jurisdiction in which no income tax is imposed.

What is Tax Waiver?

A state issued document that specifies the tax department will transfer stock as indicated. Tax waivers are often used to transfer ownership of property.