It's over. Done with. Tax day '97 has come and gone. Good riddance.
Did you make the deadline? Well, either way, chances are the word "income" has cropped up in your thoughts and/or conversations lately. It is a frequently misused and misunderstood term.
Here are the some types of income you might have encountered on your tax returns -- as well as in political debates:
Adjusted gross income: The basic building block for calculating your tax bill. Deductions that reduce your AGI are often called "above-the-line deductions." AGI essentially is your gross income minus "gain-seeking" expenses (such as business deductions and investment losses) or "policy" expenses (such as spousal support and certain retirement accounts for the self-employed).
Earned income: Compensation for services rendered. Includes wages, tips and other employee compensation, net earnings from self-employment, partnership income and others. It does not include such things as interest, dividends, rents and pensions.
Gross income: Almost all income from whatever source before you subtract allowable deductions. Tax-exempt income is generally excluded, such as interest from municipal bonds, certain Social Security benefits and 401(k) contributions.
Ordinary income: Income that doesn't arise from capital gains.
--Provisional income: Pertinent to retirees because it determines how much of a person's Social Security benefits are taxable. Includes AGI plus interest received from tax-exempt investments, certain savings bond income, certain foreign income and half of the Social Security benefits you received.
Taxable income: This is the bottom line. This figure determines your marginal tax bracket and tax. It's your AGI minus allowable standard deductions or itemized deductions and allowable personal exemptions.