Adjusted Gross Income (AGI)
Your gross income (wages, interest, dividends) minus specific adjustments like student loan interest, HSA contributions, and educator expenses. AGI is the baseline for most tax calculations.
Child Tax Credit (CTC)
A credit for families with qualifying children. For the 2025 tax year, this credit reduces tax liability and may be partially refundable (known as the Additional Child Tax Credit).
Earned Income Tax Credit (EITC)
A refundable federal tax credit for low-to-moderate-income working individuals and couples, particularly those with children.
Effective Tax Rate
The actual percentage of your total income that you pay in taxes after all deductions and credits are applied. This is often lower than your marginal tax bracket.
Filing Status
A category (Single, Married Filing Jointly, Head of Household, etc.) that determines your standard deduction amount and the tax brackets applied to your income.
Itemized Deductions
Specific expenses (like mortgage interest, state/local taxes, and charitable gifts) that you can subtract from your AGI if their total exceeds the standard deduction amount.
Marginal Tax Rate
The tax rate applied only to the last dollar of your income. Under the U.S. progressive system, you don't pay this rate on your entire income, only the portion within that specific bracket.
Refundable vs. Non-Refundable Credits
Non-refundable credits can only reduce your tax to zero. Refundable credits can reduce your tax below zero, resulting in the IRS paying the difference to you as a refund.
Standard Deduction
A flat dollar amount based on your filing status that reduces your taxable income. Most taxpayers choose the standard deduction rather than itemizing.
Withholding
The amount of federal income tax taken out of your paycheck by your employer and sent to the IRS on your behalf. This is the "tax paid" that our calculator compares against your "tax owed."