What Is the “Deduction for Half of Self-Employment Tax”?
05/29/2026
The deduction for half of self-employment tax is an “above-the-line” tax adjustment that allows self-employed individuals to subtract 50% of their self-employment tax from their gross income. This adjustment ensures that freelancers and small business owners are treated fairly compared to traditional corporations, which are allowed to deduct the employer portion of payroll taxes as
What Is “Covered security”?
05/29/2026
A covered security is an investment, such as a stock, bond, or mutual fund, for which your broker is legally required to track and report your “cost basis” to the IRS. When you sell a covered security, the broker reports both the sales price and the original purchase price to the government, making it easier
What Is “Contractor tax form”?
05/29/2026
A contractor tax form is a document used to report payments made to an individual or business that provided services but was not an employee. The most common version is Form 1099-NEC, which informs the IRS of the total “nonemployee compensation” paid during the year. 1. Meaning of “Contractor tax form” In plain English, a
What Is “Collectibles gain”?
05/29/2026
A collectibles gain is the profit you make from selling a “collectible” item—such as art, rare coins, or precious metals—that you held for more than one year. Unlike regular stocks or bonds, the IRS taxes these specific profits at a unique maximum rate that is usually higher than standard long-term capital gains. 1. Meaning of
What Is “Capital loss carryover”?
05/29/2026
Capital loss carryover is a tax provision that allows you to move unused investment losses into future tax years. If your total capital losses for the year are more than your capital gains plus the annual limit allowed against ordinary income, the remaining amount “carries over” to help lower your taxes later. 1. Meaning of
What Is “Carryover basis”?
05/29/2026
Carryover basis is a tax rule where the original cost of an asset is transferred from the person giving the asset to the person receiving it. Instead of the value “resetting” at the time of the transfer, the new owner “carries over” the previous owner’s tax history. 1. Meaning of “Carryover basis” In plain English,
What Is “Capital gain”?
05/29/2026
A capital gain is the profit you earn when you sell an asset for more than its “basis,” which is usually the original purchase price. It represents the positive difference between what you paid for an item and what you received when you sold it. 1. Meaning of “Capital gain” In plain English, a capital
What Is “Capital Contribution”?
05/29/2026
A capital contribution is the cash or assets an owner or investor puts into a business to help it operate or grow. Unlike a loan, this money is not meant to be paid back on a set schedule; instead, it represents an increase in the owner’s equity or “skin in the game.” 1. Meaning of
What Is “Capital asset”?
05/29/2026
A capital asset is nearly everything you own and use for personal purposes, pleasure, or investment. When you sell a capital asset, the difference between the amount you paid for it and the amount you sold it for results in a capital gain or a capital loss. 1. Meaning of “Capital asset” In plain English,
What Is “Business use of home”?
05/29/2026
“Business use of home” is a tax concept that allows you to deduct expenses related to a specific part of your home that you use for work. If you meet certain IRS requirements, you can subtract a portion of your housing costs—like rent, mortgage interest, and utilities—from your business income to lower your tax bill.