exemption

Definition

A magical loophole in the tax code that lets you keep slightly more of your own money, usually granted for dependents, disabilities, or other life circumstances the government deems worthy of pity. It's the carrot in a system that's mostly stick. Your accountant mentions these in hushed, reverent tones.

Example Usage

Thanks to exemptions for his three kids, Robert's tax bill was merely painful instead of completely devastating.

Source: Common tax terminology

Related Terms

Advanced

Piercing the Corporate Veil

When courts hold shareholders personally liable for corporate debts by ignoring the legal separation between company and owners. It's what happens when you treat your LLC like a personal piggy bank.

💰 Finance / Accounting

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underwrite

To assume financial risk by guaranteeing payment or agreeing to buy unsold securities, essentially the business equivalent of being the backup friend who promises to buy all the unsold Girl Scout cookies. Investment banks underwrite stock offerings, insurance companies underwrite policies, and both pray they've done their math correctly. It's putting your money where someone else's mouth is.

💰 Finance / Accounting

Beginner

A tiny slice of corporate ownership that lets you pretend you're a business mogul while actually just gambling on quarterly earnings reports. When it goes up, you're a financial genius; when it drops, the market is 'irrational.' Comes with the bonus feature of limited liability, meaning you can't lose more than you invested (small consolation when you've invested everything).

💰 Finance / Accounting

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Valuation

The estimated worth of a company, a number that ranges from scientifically calculated to completely made up depending on who's doing the estimating. Startup valuations in particular are an art form, where a company with no revenue and an idea on a napkin can be worth a billion dollars if the napkin is impressive enough.

💰 Finance / Accounting🚀 Startup / VC

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Net Worth

Everything you own minus everything you owe, a number that for most millennials can be expressed as a negative sign followed by their student loan balance. Forbes publishes a list of people with the highest net worth annually, presumably just to ruin everyone's day.

💰 Finance / Accounting

Intermediate

undervaluing

The accounting sin of assigning too low a value to an asset, which is either conservative prudence or creative bookkeeping depending on who's doing it and why. Companies engage in undervaluing to lower tax bills or appear more modest, while investors do it to snag bargains. It's the opposite of the more common corporate tendency to overvalue everything and pretend problems don't exist.

💰 Finance / Accounting

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