Category: Financial Terms

Tax Holiday A tax holiday is a temporary government measure that reduces or eliminates certain taxes for a limited period. Most commonly in the United States, tax holidays suspend state or local sales taxes for consumers, but governments also grant tax holidays to businesses as investment incentives (for example, temporary property tax exemptions for new…

Tax Havens Key takeaways * Tax havens are jurisdictions that attract foreign individuals and businesses by offering low or no taxes, financial secrecy, and minimal reporting requirements. * Using a tax haven is not inherently illegal, but failing to report foreign income or accounts to one’s home tax authority can be unlawful. * International and…

What is a TFSA? A Tax-Free Savings Account (TFSA) is a Canadian registered account that lets residents aged 18 or older contribute after‑tax money, invest it, and earn tax‑free investment income. Contributions are not tax‑deductible, but interest, dividends, and capital gains earned inside the account — and any withdrawals — are tax free. Although called…

What “Tax Free” Means “Tax free” (or tax-exempt) describes goods, services, or income that are not subject to certain taxes. Governments grant tax-free status to encourage spending, promote public projects, or provide benefits to specific groups. Common examples include certain purchases during sales-tax holidays, interest from qualifying municipal bonds, some rebates and gifts, and child…

Tax Fraud: Definition and Key Points Tax fraud is the intentional falsification or omission of information on a tax return to reduce or eliminate tax liability. It is criminal conduct that can result in fines, interest, and imprisonment. Common examples include claiming false deductions, reporting personal expenses as business expenses, using a false Social Security…

Tax Expense: Definition and Overview A tax expense is the amount a person or business recognizes as owed to federal, state, or local taxing authorities for a given reporting period. For accounting purposes, it is reported on the income statement and reduces net earnings available to owners or shareholders. How Tax Expense Is Calculated Basic…

Tax-Exempt Interest Definition Tax-exempt interest is interest income that is not subject to income tax at one or more levels: federal, state, and/or local. The most common source is interest from municipal bonds, but tax-exempt interest can also arise in certain tax-advantaged accounts. Key points Tax-exempt interest may be exempt at the federal level, the…

Tax-Exempt — What It Means and How It Works Key takeaways * Tax-exempt describes income or transactions that are not subject to federal, state, or local tax, or an organization’s status that relieves it from federal income tax. * Common tax-exempt income includes municipal bond interest, qualified Roth IRA distributions, HSA withdrawals for medical expenses,…

Tax Evasion Key takeaways Tax evasion is the intentional, illegal failure to pay taxes owed. Willfulness — a deliberate act to avoid taxes — is required for criminal charges. Consequences can include repayment of taxes with interest, civil penalties, fines, and imprisonment. Tax avoidance, by contrast, uses legal methods to reduce tax liability. What is…

Tax-Equivalent Yield The tax-equivalent yield (TEY) shows what return a taxable investment must offer to match the after-tax return of a tax-exempt investment (commonly a municipal bond). It helps investors compare taxable and tax-free bonds on an apples-to-apples basis. How it works Because interest from most municipal bonds is exempt from federal income tax (and…

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) is a major U.S. tax law enacted to reduce the federal budget deficit through revenue-raising measures, spending changes, and tighter tax compliance. Passed early in Ronald Reagan’s presidency, TEFRA reversed parts of the prior year’s Economic…

Tax-Deferred: Earnings With Taxes Delayed Until Withdrawal What “tax-deferred” means Tax-deferred investments let earnings (interest, dividends, capital gains) grow without current taxation. Taxes are due when you withdraw or otherwise take constructive receipt of the funds. This delay can enhance compound growth and lower lifetime tax liability if withdrawals occur in a lower tax bracket….

Tax Deed: Definition, How It Works, and What to Know Key takeaways A tax deed is a document that transfers ownership of real property to a government authority when property taxes go unpaid. Tax deed sales are typically auctions where the minimum bid covers delinquent taxes, interest, and sale costs; the highest bidder receives title….

Tax Deduction: What It Is and How It Works Key takeaways * A tax deduction reduces your taxable income, lowering the amount of tax you owe. * Taxpayers choose either the standard deduction or to itemize deductions on Schedule A; you cannot do both in the same year. * The Tax Cuts and Jobs Act…

Tax-Deductible Interest: What Qualifies and How to Claim It Tax-deductible interest reduces your taxable income or is deducted directly from your income, depending on the type. The IRS allows deductions for several borrowing costs, but many personal-interest payments (for example, most credit card interest and personal car loans) are not deductible. Common types that qualify…

Tax Credits: What They Are and How They Work Key takeaways * A tax credit reduces the amount of income tax you owe dollar for dollar — generally more valuable than a deduction. * Credits come in three types: nonrefundable, refundable, and partially refundable. * Some credits are temporary or have changed over time; eligibility…

Tax Breaks: What They Are and How They Work Key takeaways * Tax breaks reduce the amount of tax you owe through credits, deductions, exemptions, or exclusions. * Tax credits reduce tax liability dollar for dollar; some refundable credits can produce a refund. * Tax deductions lower taxable income and their value depends on your…

Tax Brackets Federal tax brackets determine the rate at which portions of your taxable income are taxed. For tax year 2025 (filing in 2026) there are seven federal income tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These rates are applied progressively, so different portions of your income are taxed at different rates….

Tax Benefit: Definition, Types, and How They Work What is a tax benefit? A tax benefit is any provision in tax law that reduces a taxpayer’s liability. Benefits take several forms—deductions, credits, exemptions, exclusions, and tax‑advantaged investments—and are used to lower taxes for individuals and businesses or to encourage specific behaviors (for example, homeownership or…

Tax Base Key takeaways * A tax base is the total value of assets, income, and economic activity within a jurisdiction that can be taxed. * Tax liability is calculated by applying a tax rate to the tax base: Tax Liability = Tax Base × Tax Rate. * Different types of taxes (income, property, sales,…

Tax Avoidance Tax avoidance is the legal use of tax laws and provisions to reduce the amount of tax owed. It relies on credits, deductions, exclusions and timing strategies written into the tax code. Tax evasion — hiding income or falsifying information to pay less tax — is illegal and carries criminal penalties. Key takeaways…

Tax-Advantaged Accounts: Maximize Savings and Reduce Taxes Tax-advantaged accounts and investments offer meaningful tax benefits that help investors grow wealth and lower tax liability. They generally fall into two categories: tax-deferred (taxes paid later) and tax-exempt (tax-free growth and withdrawals). Knowing the difference and how each works can help you choose the right vehicles for…

Tax Accounting Tax accounting is the branch of accounting that focuses on preparing tax returns and calculating tax liabilities for individuals, businesses, and other entities. It is governed by tax laws and regulations and concentrates only on transactions that affect taxable income and deductions. Key points Focuses exclusively on items that affect tax liability: income,…

What Is a Tariff? A tariff is a tax or fee a country charges on goods and services imported from another country. Tariffs raise the price of foreign products for domestic consumers and are used to generate revenue, protect local industries, or achieve policy goals. How Tariffs Work A tariff increases the landed cost of…

Targeted Accrual Redemption Note (TARN) Key takeaways * A TARN is an exotic, index-linked note that pays periodic coupons and redeems early once cumulative coupon payments reach a preset target. * Early redemption returns principal (par value) when the coupon cap is hit; otherwise the note continues to maturity. * FX-TARNs are a common variant…

Target Markets A target market is the group of consumers most likely to buy a product or service because they share defining characteristics—such as age, income, location, lifestyle, or buying behavior. Identifying a target market guides product design, pricing, packaging, promotion, and distribution. Key points A target market groups customers by shared characteristics that predict…

Target-Date Funds Explained: Risk Management and Real-Life Examples What is a target-date fund (TDF)? A target-date fund (TDF) is a pooled investment designed to simplify long-term saving—typically for retirement—by automatically adjusting its asset mix over time. You pick a fund with a target year near your expected retirement date (for example, 2045 or 2065). The…

Tapering What is tapering? Tapering is the gradual reversal of a central bank’s quantitative easing (QE) program. During QE, a central bank buys assets (like government bonds and mortgage-backed securities) to inject liquidity into the economy. Tapering slows and then stops those asset purchases, and may include allowing assets to mature or reducing the central…

Taper Tantrum Definition The “taper tantrum” refers to the sharp increase in U.S. Treasury yields in 2013 that followed the Federal Reserve’s announcement that it would eventually reduce (taper) its large-scale purchases of bonds under quantitative easing (QE). The reaction reflected investor anxiety about reduced central-bank support rather than an immediate policy change. Background: QE…

Tape Reading Tape reading is a technique for interpreting market activity by watching real-time price and volume information. Originally practiced with physical ticker tape in the late 19th and early 20th centuries, the method has evolved into modern analysis of electronic order books and market data to anticipate short-term price moves. Origins and historical methods…

What Is Tangible Personal Property and How Is It Taxed? Tangible personal property (TPP) is physical, movable property that can be seen and touched — for example, furniture, machinery, office equipment, vehicles, livestock, jewelry, and electronics. It is distinct from real property (land and buildings) and from intangible property (patents, trademarks, goodwill). TPP is commonly…

Tangible Net Worth Key takeaways * Tangible net worth (TNW) measures the value of a company’s or individual’s physical assets after subtracting liabilities and intangible assets. * Formula: TNW = Total assets − Liabilities − Intangible assets. * Lenders use TNW to assess collateral value and set borrowing limits; it is a rough proxy for…

Tangible Common Equity (TCE) Tangible common equity (TCE) measures a firm’s physical equity available to common shareholders after removing intangibles and preferred capital. It is most commonly used to assess banks and other financial institutions’ ability to absorb losses and to estimate a conservative liquidation value. Why TCE matters Focuses on tangible (physical) capital—what would…

Tangible Book Value Per Share (TBVPS): Definition and Formula Tangible book value per share (TBVPS) measures the per-share value of a company’s net tangible assets — that is, shareholders’ equity excluding preferred stock and intangible assets. It estimates what common shareholders might receive per share if the company were liquidated and only tangible assets were…

What Is a Tangible Asset? Comparison to Non-Tangible Assets Definition A tangible asset is a physical item with measurable monetary value that a business can touch, use, or sell. Examples include land, buildings, machinery, inventory, furniture, and equipment. Tangible assets are recorded on a company’s balance sheet and typically provide future economic benefits. Key takeaways…