Adjusted Basis
The original cost of an asset adjusted for depreciation deductions taken, improvements made, and other adjustments. When an asset is sold, the difference between the sale price and adjusted basis determines the gain or loss.
Roth Conversion
The process of transferring funds from a traditional IRA or 401(k) to a Roth IRA. The converted amount is included in taxable income for the year of conversion, but future qualified withdrawals from the Roth IRA are tax-free.
Section 179 Expensing
An election that allows businesses to deduct the full purchase price of qualifying equipment and software in the year it is placed in service, subject to annual dollar limits ($1,250,000 for 2025) and a phase-out threshold. Unlike bonus depreciation, Section 179 cannot create or increase a net operating loss.
Net Operating Loss
A tax loss that occurs when a taxpayer’s allowable deductions exceed their taxable income in a given year. NOLs can generally be carried forward indefinitely to offset up to 80% of taxable income in future years (with some exceptions).