15 | American tax system

Today you will learn 5 new English words related to "American tax system"

Author

SEWT Team
October 23, 2024

American tax system

Understanding the “American tax system” is helpful for ESL learners, like yourself, who plan to live or work in the United States. Taxes affect everyday life, influencing things like paychecks and purchases. By learning today’s vocabulary, you can navigate financial matters more confidently and ensure that you are fulfilling your tax obligations correctly. Let’s jump right in!

In today’s lesson, you’re going to have:

  • 5 advanced English vocabulary words about American tax system.

  • 15 examples of phrases that you can use on a daily basis.

  • Eye-catching images will help you learn and retain the vocabulary.

5 VOCABULARY WORDS

1. Deduction

Noun

📚 DEFINITION

An amount or expense subtracted from gross income to reduce taxable income.

📄 Example Sentences:

  1. He claimed a substantial deduction for his home office expenses.

  2. Charitable donations often qualify for tax deductions.

  3. Mortgage interest payments can be eligible for deductions on your tax return.

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2. Taxable Income

Noun

📚 DEFINITION

The portion of income that is subject to taxation after deductions, exemptions, and other adjustments.

📄 Example Sentences:

  1. His taxable income was lower this year due to various deductions.

  2. They calculated their taxable income carefully to minimize taxes owed.

  3. Capital gains are included in taxable income calculations.

3. Exemption

Noun

📚 DEFINITION

An amount of money that taxpayers can subtract from their taxable income.

📄 Example Sentences:

  1. Each dependent claimed as an exemption reduces taxable income.

  2. Taxpayers are entitled to a personal exemption for themselves.

  3. In some cases, medical expenses can be claimed as exemptions.

4. Withholding

Noun

📚 DEFINITION

The amount of an employee's pay withheld by the employer for payment of income taxes.

📄 Example Sentences:

  1. The company adjusted the withholding on his paycheck after he updated his W-4.

  2. Incorrect withholding can lead to owing taxes at the end of the year.

  3. Understanding your withholding can help you plan for tax season.

5. Tax Credit

Noun

📚 DEFINITION

A dollar-for-dollar reduction in the amount of tax that a person or company would otherwise owe.

📄 Example Sentences:

  1. Renewable energy purchases often qualify for a tax credit.

  2. The child tax credit can significantly reduce a family's tax liability.

  3. He claimed a tax credit for installing energy-efficient appliances.

A PARAGRAPH USING THE 5 VOCABULARY WORDS

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The American tax system can seem complex, but let's break down some key concepts. Your employer withholds a portion of your income for taxes throughout the year. This is called your withholdings, and is based on your filing status (single, married, etc.) and allowances you claim for dependents. At tax time, you can reduce your taxable income by claiming deductions for expenses like mortgage interest or charitable donations. You might even qualify for tax credits, which directly reduce your tax bill. Finally, after subtracting deductions and exemptions, you're left with your taxable income, which is then taxed according to a progressive system, meaning higher earners pay a larger percentage.

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