Tax Glossary

An estate tax and gift tax deduction for assets passing to a spouse. It allows estate and gift transfers completely free of tax.

The difference between face value of a bond and lower market price, attributable to rising interest rates. On a sale, gain on the bond is generally taxed as ordinary income to the extent of the discount.

Rules for determining whether a person is active in a business activity for passive activity rule purposes. Unless the tests are met, passive loss limits apply.

Generally, itemized deductions for job and investment expenses subject to a 2% of adjusted gross income floor.

Depreciation methods applied to assets placed in service after 1986.

This is generally adjusted gross income increased by certain items such as tax-free foreign earned income. MAGI usually is used to determine phaseouts of certain deductions and credits.

Fully deductible interest on up to two residences if acquisition debt secured by a home is $1 million or less, and home equity debt is $100,000 or less.