As a taxpayer, the complex world of taxes can seem overwhelming. This is the case, especially when faced with unfamiliar and confusing terms. To help you better understand tax-related concepts, we, a tax consultant in Calgary, will break down some common tax jargon.

Understanding Adjusted Gross Income (AGI)

Adjusted Gross Income, or AGI, is a crucial term to grasp. As a tax consultant in Calgary explained, AGI is the main starting point for calculating your taxable income. It is your total income minus specific adjustments, such as alimony payments or student loan interest.” Knowing your AGI is essential for determining your eligibility for various tax deductions and credits.

Navigating Itemized Deductions

Itemized deductions can be tricky, but they can lower your taxable income. “Itemized deductions are expenses that you can subtract from your AGI,” clarifies a tax consultant in Calgary. “These may include mortgage interest, charitable donations, and medical expenses that exceed a certain threshold.” It’s important to note that you can choose between itemizing and taking the standard deduction, depending on which option benefits you more.

The Importance of Tax Credits

Tax credits are often confused with deductions but serve a different purpose. A tax consultant in Calgary explains, “While deductions reduce your taxable income, tax credits directly reduce the amount of tax you owe. Some common credits include the Child Tax Credit, the Earned Income Tax Credit, and education credits.” Understanding which credits you qualify for can significantly impact your overall tax liability.

Grasping Capital Gains and Losses

If you’ve invested in stocks, bonds, or real estate, you may have heard the terms “capital gains” and “capital losses.” A tax consultant in Calgary defines capital gains as “the profits you earn when you sell an asset for more than you paid for it. Conversely, capital losses happens when you sell an asset for less than its purchase price.” These gains and losses can affect your tax situation, so keeping accurate records of your investments is crucial.

Seeking Professional Guidance

Navigating tax jargon and regulations can be challenging, even with a basic understanding of key terms. That’s where the expertise of a tax consultant in Calgary comes into play. These professionals can provide personalized guidance, ensure you’re taking advantage of all available deductions and credits, and help you comply with tax laws.

The Bottom Line

Now you know the complex terminologies associated with tax. With this knowledge, you’ll be better equipped to deal with the tax landscape. However, it would be best if you still had an experienced tax accountant for yourself or your small business. That’s where we come in. At AM Accountants Professional Corporation, our tax consultant in Calgary can help you break down complex jargon, maximize your tax savings, and achieve greater financial peace of mind. Contact us today!