Common Tax Acronyms Explained

Tax professionals drop abbreviations constantly: QBI, MAGI, MACRS, REPS, NOL. If you have ever nodded along while quietly wondering what the letters stood for, this guide is the plain-English reference. The definitions are grouped by category so you can find what you need and understand how the pieces connect.

Income: AGI, MAGI, QBI, COGS

AGI (Adjusted Gross Income) is your total income from all sources minus a specific list of above-the-line deductions. Those deductions include retirement plan contributions, the deductible half of self-employment tax, self-employed health insurance premiums, HSA contributions, and student loan interest. AGI matters because it is the starting point for calculating everything else: tax brackets, the standard deduction phaseouts, and eligibility rules for dozens of credits and deductions. It appears on Line 11 of Form 1040.

MAGI (Modified Adjusted Gross Income) starts with your AGI and adds back certain items. Which items get added back depends on what the MAGI figure is being used for. For the passive activity loss exception for landlords, MAGI adds back things like IRA deductions and rental losses. For Roth IRA eligibility, different items are added back. The practical takeaway is that when someone says a deduction phases out above a certain income, the income figure is usually MAGI, not AGI.

QBI (Qualified Business Income) is the net amount of income, gain, deductions, and losses from a qualified trade or business conducted in the United States. It is the figure on which the Section 199A deduction is calculated. QBI does not include wages you pay yourself as an S-corp employee, guaranteed payments from a partnership, investment income, or capital gains. For most sole proprietors and single-member LLC owners, QBI is roughly the same as Schedule C net profit.

COGS (Cost of Goods Sold) is the direct cost of the products you sold this year: what you paid for inventory, inbound shipping and duties, and direct labor to prepare the goods. It is deducted from gross sales on Schedule C Part III before your other expenses. Spending money on inventory does not create a deduction until the item actually sells, which is why year-end stock counts matter for resellers.

Taxes you pay: SE tax, FICA, SECA, NIIT, AMT

FICA (Federal Insurance Contributions Act) is the law that requires payroll taxes funding Social Security and Medicare. When you are an employee, you pay 6.2 percent for Social Security and 1.45 percent for Medicare, and your employer pays a matching 6.2 and 1.45. The combined rate is 15.3 percent. The Social Security portion only applies to the first $184,500 of wages in 2026; Medicare applies to all wages.

SE tax (Self-Employment Tax) is the self-employed version of FICA, governed by the Self-Employment Contributions Act (SECA). Because there is no employer to pay the other half, you pay the full 15.3 percent yourself on net self-employment income up to $184,500 in 2026, then 2.9 percent on anything above that. The IRS lets you deduct half of your SE tax as an above-the-line adjustment to income, which reduces your AGI and your income tax.

NIIT (Net Investment Income Tax) is a 3.8 percent surtax that applies to net investment income when your MAGI exceeds $200,000 if you file as single or $250,000 if you file jointly. Investment income includes interest, dividends, capital gains, rents, royalties, and passive business income. Active business income is generally exempt. The thresholds have not been adjusted for inflation since the NIIT was enacted in 2013. Passive rental income is subject to it; rental income that is non-passive because you qualify as a real estate professional may not be.

AMT (Alternative Minimum Tax) is a parallel tax system that runs alongside the regular income tax calculation and applies when it produces a higher number. It eliminates or limits many deductions and uses its own rate structure. For 2026, the AMT exemption is $90,100 for single filers and $140,200 for married filing jointly. The exemption phases out once AMT income exceeds $500,000 (single) or $1,000,000 (joint), at a rate of 50 cents per dollar over the threshold.

Retirement accounts: SEP-IRA, Solo 401(k), SIMPLE IRA, HSA, HDHP

SEP-IRA (Simplified Employee Pension) is a retirement plan available to self-employed people and small business owners. Contributions are made by the employer only. You can contribute up to 25 percent of net self-employment income, capped at $72,000 for 2026. The plan can be opened and funded right up to your tax filing deadline including extensions.

Solo 401(k) allows contributions from both the employee side and the employer side. The employee deferral is up to $24,500 in 2026, and the employer profit-sharing piece can add up to 25 percent of compensation. The combined limit is $72,000 for those under 50, $80,000 for ages 50 to 59, and $83,250 for ages 60 to 63. The higher limits at lower incomes make the Solo 401(k) better than a SEP-IRA for most people under roughly $150,000 in net self-employment income. See our detailed comparison in the SEP-IRA vs Solo 401(k) guide.

SIMPLE IRA (Savings Incentive Match Plan for Employees) is a retirement plan for small businesses with 100 or fewer employees. It involves both employee deferrals and mandatory employer contributions and is simpler to administer than a full 401(k) plan, but carries lower contribution limits. The Solo 401(k) is generally the better choice for a one-person business.

HSA (Health Savings Account) is a tax-advantaged savings account for people enrolled in a qualifying high-deductible health plan. Contributions are deductible above the line, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free, making it the only triple-tax-advantaged account in the tax code. For 2026, the contribution limit is $4,400 for self-only coverage and $8,750 for family coverage. Unused funds roll over year to year. See our guide to HSAs for the self-employed.

HDHP (High-Deductible Health Plan) is the plan type required for HSA eligibility. For 2026, an HDHP must have a minimum annual deductible of $1,700 for self-only coverage or $3,400 for family coverage, and out-of-pocket maximums that do not exceed $8,500 (self-only) or $17,000 (family).

Tax forms: Schedules C, E, SE; W-2, W-9; 1099-NEC, 1099-K, 1099-MISC

Schedule C is the IRS form attached to Form 1040 where sole proprietors and single-member LLC owners report business income and deductions. Revenue goes on Part I, expenses on Part II, cost of goods sold on Part III. Net profit flows to Form 1040 as self-employment income and is also what self-employment tax is calculated on.

Schedule E reports supplemental income from rental real estate, royalties, S-corporation K-1s, and partnership K-1s. Each rental property gets its own column. Rental income is generally passive and not subject to SE tax, though it can be subject to the NIIT.

Schedule SE is where self-employment tax is calculated. Net profit from Schedule C flows to Schedule SE, which computes the 15.3 percent and 2.9 percent amounts. The total SE tax then appears on Form 1040, and half of it shows up as a deduction on Schedule 1.

W-2 is the wage and tax statement an employer provides to employees by January 31. If you have an S-corp and pay yourself a salary, you receive a W-2 from your own company.

W-9 is the form a business uses to collect a contractor's taxpayer identification number before issuing a 1099. It is not filed with the IRS; it stays in the payer's records.

1099-NEC (Nonemployee Compensation) reports payments to independent contractors for services. For 2026 and later, the threshold is $2,000, raised from $600 by the OBBBA. Receiving no 1099-NEC does not mean the income is tax-free; the obligation to report and pay tax on business income does not depend on receiving a form. See our guide on who gets a 1099-NEC.

1099-K reports payments processed through third-party platforms: credit card networks, PayPal, Stripe, Venmo for business, Etsy, and similar services. The 2026 federal threshold is more than $20,000 in payments and more than 200 transactions in the year; both conditions must be true. The amount on a 1099-K is gross receipts before any platform fees.

1099-MISC (Miscellaneous Information) covers payments that are not contractor compensation for services: rents paid to a landlord, royalties, prizes and awards, and certain other types of income. It is no longer used for contractor payments; that moved to the 1099-NEC in 2020.

EIN (Employer Identification Number) is a nine-digit number the IRS assigns to businesses. It is the business equivalent of a Social Security number and is used on tax returns, W-9 forms, and business bank accounts. Sole proprietors can use their SSN instead, but an EIN keeps your personal number off paperwork you hand to clients and vendors.

Business structures: LLC, S-corp

LLC (Limited Liability Company) is a state-law entity that provides liability protection separating personal assets from business debts. By itself, an LLC does not change how you are taxed. A single-member LLC is a disregarded entity by default, meaning you file Schedule C just as a sole proprietor would. A multi-member LLC is taxed as a partnership by default. Either can elect to be taxed as an S-corp by filing Form 2553.

S-corp (S Corporation) is a federal tax election, not a separate state entity type. Under S-corp taxation, the owner-employee pays themselves a reasonable W-2 salary, which is subject to payroll tax. Net profit beyond the salary passes through as a distribution, which is not subject to self-employment or payroll tax. S-corp status makes sense once net profit is consistently above roughly $50,000 to $60,000 a year.

Depreciation and losses: MACRS, GDS, ADS, QIP, NOL

MACRS (Modified Accelerated Cost Recovery System) is the IRS method for depreciating business assets. It assigns each asset class a recovery period and a depreciation method. The system replaced ACRS in 1986 and applies to most property placed in service after that date.

GDS (General Depreciation System) is the standard version of MACRS and the one that applies in most situations. It uses accelerated methods for shorter-lived assets and straight-line for real property. Common GDS recovery periods: 5 years for computers and cars, 7 years for most office equipment and furniture, 15 years for land improvements and qualified improvement property, 27.5 years for residential rental buildings, and 39 years for commercial buildings.

ADS (Alternative Depreciation System) is a slower, straight-line method with longer recovery periods. It is required in specific situations, including for rental property held by a business that elects out of the interest expense limitation rules. Under ADS, residential rental property depreciates over 30 years instead of 27.5.

QIP (Qualified Improvement Property) refers to improvements made to the interior of a nonresidential (commercial) building after the building was placed in service. QIP has a 15-year GDS recovery period, which means it qualifies for bonus depreciation. Before the CARES Act fix in 2020, QIP was mistakenly assigned a 39-year life, a drafting error that has since been corrected retroactively.

NOL (Net Operating Loss) occurs when a business's allowable tax deductions in a year exceed its gross income. For NOLs arising after 2017, there is no carryback (except for certain farming losses), but the loss carries forward indefinitely. It can offset only up to 80 percent of taxable income in any future year. If you have a $100,000 NOL carryforward and $80,000 in taxable income next year, you can use $64,000 of the NOL (80 percent of $80,000) and carry the remaining $36,000 forward.

Real estate: REPS, 1031

REPS (Real Estate Professional Status) is an IRS classification under IRC Section 469(c)(7) that removes qualifying taxpayers' rental properties from the passive activity rules. To qualify, you must spend more than 750 hours per year in real property trades or businesses and those hours must represent more than half of all your personal service hours for the year. You must also materially participate in each property, or make a group election to treat all your rentals as one activity. We cover the full requirements in our real estate professional tax status guide.

1031 exchange refers to the provision in Section 1031 of the tax code that allows you to defer capital gains when you sell an investment property and reinvest the proceeds into another qualifying investment property. You have 45 days from closing to identify replacement properties and 180 days to close on one of them.

Tax law: TCJA, OBBBA

TCJA (Tax Cuts and Jobs Act) was signed into law in December 2017 and made the most significant changes to the U.S. tax code in decades. It created the QBI deduction, roughly doubled the standard deduction, capped the state and local tax deduction (SALT) at $10,000, lowered the corporate income tax rate to 21 percent, and introduced 100 percent bonus depreciation for qualifying property. Many of its individual provisions were set to expire after 2025.

OBBBA (One Big Beautiful Bill Act) was signed into law on July 4, 2025. It made permanent most of the TCJA provisions that were scheduled to expire, and added new ones. For small business owners and real estate investors, the most relevant changes are: the QBI deduction is permanent at 20 percent; 100 percent bonus depreciation is permanent for qualifying property acquired after January 19, 2025; the Section 179 limit was raised to $2,560,000 with a phase-out starting at $4,090,000; the SALT cap was raised from $10,000 to $40,000 for tax year 2026; and the 1099-NEC reporting threshold was raised from $600 to $2,000 for payments made on or after January 1, 2026.

How Vuuv helps

Knowing what these terms mean does not make the record-keeping easier on its own. Vuuv connects to your bank and cards, pulls transactions in automatically, and sorts them into the categories that match Schedule C and Schedule E. When tax season comes and your accountant asks about your QBI, your COGS, or your passive losses per property, the numbers are already in one place.

This article is general information, not tax advice. Tax rules change and every situation is different. Confirm the details against current IRS guidance or talk to a qualified tax professional before you file.