Financial Terms Glossary
Definitions of financial terms used across FiscalCalculators.com. Master the vocabulary of investing, lending, taxes, and business finance.
APR (Annual Percentage Rate)
The yearly cost of borrowing, expressed as a percentage. APR includes interest rates plus any fees or additional costs associated with the loan. For auto loans, a 7.5% APR means you pay 7.5% of the principal annually.
Amortization
The process of paying off a loan through regular, equal payments over a set period. Each payment covers a portion of principal and interest, with interest front-loaded in early months. A 30-year mortgage amortizes the debt across 360 equal monthly payments.
Down Payment
The initial cash payment you make toward a purchase, with the remainder financed through a loan. A 20% down payment on a $30,000 car means paying $6,000 upfront and financing $24,000. Higher down payments improve loan-to-value (LTV) ratios and reduce lender risk.
Compound Interest
Interest earned on both principal and previously earned interest, creating exponential growth. At 7% annual interest, $10,000 grows to $19,672 in 10 years, but $38,065 in 20 years. Compounding frequency (daily, monthly, quarterly, annually) affects total returns.
Inflation
The rate at which the general price level of goods and services rises over time, reducing purchasing power. At 3% inflation, the $100 in your pocket today is worth $97 in purchasing power next year. Inflation erodes real returns and must be considered when planning investments.
Real vs. Nominal Return
Nominal return is the percentage gain on investment before accounting for inflation; real return is the gain after inflation is subtracted. If an investment returns 8% nominally but inflation is 3%, the real return is approximately 5%. Real returns measure true wealth growth.
Interest Rate
The percentage of principal charged by a lender for borrowing money, typically expressed annually. Current rates: new auto loans average 7.5%, mortgages average 6.8%, credit cards average 19-24%. Higher credit scores qualify for lower rates.
Loan-to-Value (LTV)
The ratio of loan amount to asset value, expressed as a percentage. A $24,000 loan on a $30,000 car equals 80% LTV. Lower LTV (20% down payment = 80% LTV) means lower risk to lenders and better interest rates for borrowers.
DSCR (Debt Service Coverage Ratio)
A business metric showing how many times annual net operating income covers annual debt payments. A DSCR of 1.25 means the business generates $1.25 in income for every $1.00 in debt payments. Banks typically require minimum DSCR of 1.20-1.25 for commercial loans.
EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization)
A business profitability metric showing operating earnings before financing and tax effects. EBITDA multiples vary by industry: SaaS companies trade at 8-12x EBITDA, manufacturing at 5-8x, services at 3-6x. Used to determine business valuation.
Gross Profit Margin
Revenue minus cost of goods sold, divided by revenue, expressed as a percentage. If a product sells for $100 and costs $40 to make, gross margin is 60%. High gross margins indicate pricing power; low margins indicate cost pressure.
Net Profit Margin
Net profit (after all expenses, taxes, and interest) divided by revenue, expressed as a percentage. A healthy net margin is 5-10% for most industries; SaaS averages 20-30%, restaurants average 3-5%. Net margin reflects true business profitability.
Markup vs. Margin
Markup is the percentage increase from cost to selling price; margin is the profit as a percentage of selling price. A $100 cost marked up 50% sells for $150 (50% markup, 33% margin). A $100 cost with a 50% margin sells for $200.
ROI (Return on Investment)
The profit from an investment divided by the investment cost, expressed as a percentage. A $10,000 investment that generates $1,500 profit = 15% ROI. ROI can be calculated annualized or over the entire holding period.
Payback Period
The time it takes for cumulative cash flows to recover the initial investment. If you invest $50,000 and receive $10,000 annually, the payback period is 5 years. Short payback periods are preferred; they indicate faster capital recovery.
The 4% Rule
A retirement planning guideline stating you can safely withdraw 4% of your retirement portfolio annually, adjusted for inflation. A $1 million portfolio supports $40,000 annual withdrawals. This rule assumes 30 years of retirement and a 60/40 stock/bond allocation.
Tax Bracket
The income range that determines your marginal tax rate. 2026 brackets range from 10% to 37%. Earning $50,000 as a single filer puts you in the 22% bracket, not all income is taxed at 22%—only income in that bracket.
Standard Deduction
A fixed amount you can subtract from taxable income if you don't itemize deductions. 2026: $16,100 (single), $32,200 (married filing jointly), $24,150 (head of household). Reduces taxable income and tax liability without tracking individual expenses.
Section 179 Deduction
IRS rule allowing businesses to deduct the full cost of qualifying equipment purchases in the year purchased, rather than depreciate over time. 2026 limit: $2.56 million. Commonly used for vehicles, machinery, and software to accelerate deductions and reduce taxable income.
Depreciation
The process of deducting the cost of an asset over its useful life. A $50,000 piece of equipment depreciated over 5 years = $10,000 annual deduction. Different assets have different useful lives: vehicles (5 years), buildings (27.5 years), software (3-5 years).
Qualified Business Income (QBI) Deduction
Tax deduction allowing eligible business owners to deduct up to 20% of qualified business income on their personal returns. Available to sole proprietors, partnerships, S-corps, and other pass-through entities. Requires pass-through entity taxable income below $191,950 (single) / $383,900 (married) for full deduction.
S-Corp
A business structure taxed as a pass-through entity where profits avoid double taxation. Owners must take reasonable W-2 wages, but remaining profits avoid 15.3% self-employment tax. Ideal for high-income service businesses. Requires filing Form 2553 with IRS.
Self-Employment Tax
Social Security and Medicare taxes paid by self-employed individuals. 15.3% of net self-employment income (12.4% Social Security on income up to $168,600 in 2026, 2.9% Medicare on all income). S-Corps and C-Corps can reduce this by taking W-2 wages.
Earned Income Credit (EIC)
Refundable tax credit for low-to-moderate income earners. 2026 maximum: $3,833 (single, no qualifying children) to $3,733 (married, no children). Can result in refunds even if no tax is owed. Phase-out begins at $21,370 (single) / $27,380 (married).
Student Loan Interest Deduction
Deduction of up to $2,500 in student loan interest paid during the year. Available if MAGI is below $85,000 (single) / $170,000 (married), though $2,500 is fully deductible for all filers within those income limits. Phases out above those thresholds.
Cryptocurrency Capital Gains
Tax on profit from selling crypto. Short-term gains (held <1 year) taxed as ordinary income at rates up to 37%. Long-term gains (held >1 year) taxed at 0%/15%/20% depending on income. Every trade is a taxable event, even exchanges between coins.
Equipment Lease vs. Buy
Financial decision comparing operating lease (monthly payment, off-balance-sheet) vs. purchase (upfront cost, depreciation). Leasing is ideal for tech that depreciates rapidly; buying is better for long-term assets. NPV and payback period determine optimal choice.
Net Present Value (NPV)
The present-day value of future cash flows, discounted by a required rate of return. Positive NPV indicates the investment returns more than the cost of capital. Used to compare lease vs. buy decisions and evaluate business investments.
Amortization Schedule
A complete table of loan payments showing how much of each payment goes to principal vs. interest over the full loan term. In a 30-year mortgage, 80%+ of early payments go to interest; by year 25, most goes to principal. Lenders are required to provide this under the Truth in Lending Act.
Adjustable Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on a benchmark index (Prime Rate, SOFR). Common structures: 5/1 ARM (fixed 5 years, adjusts annually after). ARMs start lower than fixed rates but carry rate-risk exposure — always stress-test at current rate + 2% before signing.
Annual Percentage Yield (APY)
The real annual rate of return on savings, accounting for compound interest. APY is always higher than APR for savings. High-yield savings accounts advertise APY. In 2026, top HYSAs offer 4.5% APY. Compare APY (not base rate) when evaluating savings accounts and CDs.
Asset Depreciation
The reduction in value of a business asset over time, used to claim tax deductions. IRS recovery periods range from 3 years (small tools) to 39 years (commercial real estate). MACRS (Modified Accelerated Cost Recovery System) is the standard method for U.S. businesses.
Balance Transfer
Moving high-interest credit card debt to a new card offering a 0% intro APR period (typically 12–21 months). Saves hundreds or thousands in interest if you pay off the balance before the promotional rate expires. Watch for balance transfer fees (typically 3–5%).
Basis Points (bps)
A unit of measure for interest rates where 1 basis point = 0.01%. A rate increase from 6.75% to 7.00% is 25 basis points. Used to describe small rate changes precisely. Central banks and lenders commonly express rate changes in bps.
Bond
A fixed-income debt security where an investor loans money to a borrower (corporation or government) for a fixed interest rate over a defined period. U.S. Treasury bonds are considered risk-free; corporate bonds pay higher yields for higher default risk. Bond yields move inversely to price.
Break-Even Point
The revenue level at which total costs equal total revenue — no profit or loss. Formula: Fixed Costs ÷ Gross Margin %. A business with $50,000 fixed costs and 40% gross margin needs $125,000 in revenue to break even. Below this, every sale loses money.
Capital Gains Tax
Tax on profit from selling a capital asset (stocks, real estate, crypto). Short-term gains (held under 1 year) are taxed at ordinary income rates (up to 37%). Long-term gains (held over 1 year) are taxed at 0%, 15%, or 20% depending on income. Crypto is subject to capital gains tax as property.
Cash Flow
The net amount of cash and equivalents moving in and out of a business or investment. Positive cash flow means more cash in than out. For real estate investors, cash flow = Gross Rent – PITIA – Operating Expenses. Negative cash flow requires out-of-pocket contributions monthly.
Certificate of Deposit (CD)
A savings account with a fixed interest rate and fixed maturity date. CDs typically offer higher rates than regular savings in exchange for keeping funds locked for a set term. In 2026, 1-year CDs average 4.8% APY. Early withdrawal penalties apply if funds are accessed before maturity.
Collateral
An asset pledged by a borrower to secure a loan. If the borrower defaults, the lender can seize the collateral. SBA loans over $350,000 require maximum collateralization including business and personal real estate. Collateral reduces lender risk and can lower interest rates.
Cost of Goods Sold (COGS)
The direct costs attributable to producing a product or service — materials, direct labor, manufacturing overhead. COGS excludes marketing, admin, and overhead. Gross Profit = Revenue – COGS. Lower COGS = higher gross margin. Retailers typically have 50%+ COGS; SaaS companies may have under 20%.
Debt-to-Income Ratio (DTI)
The percentage of monthly gross income that goes toward debt payments. Conventional mortgage underwriting requires DTI under 43%; 36% or lower is preferred. Front-end DTI covers only housing costs; back-end includes all monthly debt obligations. High DTI limits loan eligibility and terms.
Discretionary Income
Income remaining after essential expenses (taxes, housing, food, transportation) are paid. Federal student loan income-driven repayment plans calculate payments as a percentage of discretionary income above 150% of the poverty line. RAP uses 10% of AGI as the payment formula (no poverty line exemption).
Dividend
A cash payment distributed by a corporation to its shareholders, typically quarterly. S&P 500 dividend yield averages ~1.3–1.5% annually in 2026. Qualified dividends (from U.S. companies, held 60+ days) are taxed at long-term capital gains rates. REITs distribute 90%+ of income as dividends.
Dollar-Cost Averaging (DCA)
Investing a fixed amount at regular intervals regardless of market price, buying more shares when prices are low and fewer when high. DCA removes emotional timing decisions and reduces the risk of investing a lump sum at a market peak. Most 401(k) contributions are automatically DCA.
Earnest Money
A good-faith deposit made when a buyer submits a purchase offer on real estate — typically 1–3% of the purchase price. If the deal closes, earnest money is applied to the down payment. If the buyer backs out without cause, the seller typically keeps the deposit. Protects sellers from non-serious buyers.
EBITDA Multiple
A valuation metric used to determine business value: Enterprise Value ÷ EBITDA. Industry multiples in 2026: SaaS 8–10x, Medical/Dental 5–7.5x, HVAC/Trades 3.5–5.5x, Retail 2.5–4.5x. A business with $500K EBITDA at a 5x multiple is worth approximately $2.5M.
Effective Tax Rate
The actual percentage of total income paid in taxes, blending rates across all tax brackets. Different from the marginal rate (highest bracket applied to last dollar). On $100,000 taxable income (single, 2026), effective federal rate is approximately 16%, not the 22% marginal rate.
Emergency Fund
Liquid savings (cash or high-yield savings) equal to 3–6 months of essential expenses, held for unexpected job loss, medical bills, or major repairs. This is the first financial priority before investing. At $5,000/month in expenses, your emergency fund target is $15,000–$30,000.
Equity
The ownership value of an asset after subtracting all outstanding liabilities. For a home: Market Value – Mortgage Balance = Equity. For a business: Total Assets – Total Liabilities = Shareholder Equity. Building equity means reducing debt and/or increasing asset value over time.
FICA Tax
Federal Insurance Contributions Act taxes funding Social Security and Medicare. In 2026: employee pays 6.2% Social Security (up to $184,500 wage base) + 1.45% Medicare = 7.65% total. Employers match 7.65%. Self-employed individuals pay both sides (15.3%) via self-employment tax.
Fixed Rate vs. Variable Rate
Fixed-rate loans have an interest rate that stays constant for the full loan term. Variable-rate loans (also called adjustable rates) change based on a benchmark index (Prime Rate, SOFR). Fixed rates offer certainty; variable rates start lower but carry risk if rates rise. SBA 7(a) loans over 7 years are often variable.
Free Cash Flow (FCF)
Operating cash flow minus capital expenditures. Represents cash a business generates after maintaining and expanding its asset base. FCF is the primary metric for business valuation in M&A. FCF > Net Income is a sign of a high-quality business; FCF < Net Income may indicate accounting irregularities.
FUTA (Federal Unemployment Tax)
The federal payroll tax funding unemployment benefits, paid by employers (not employees). The standard rate is 6% on the first $7,000 of wages per employee, but most employers qualify for a 5.4% credit if state unemployment taxes are paid on time, reducing the effective rate to 0.6%.
Future Value (FV)
The value of a current asset or sum of money at a future point in time, based on an assumed rate of growth. FV = PV × (1 + r)^n. The core concept behind compound interest calculators and retirement planning: your $10,000 today at 7% annually becomes $76,122 in 30 years.
Gross Domestic Product (GDP)
The total monetary value of all goods and services produced in a country during a specific period. GDP growth indicates economic expansion; contraction signals recession. The U.S. GDP in 2026 is approximately $30 trillion. GDP growth directly affects employment, wages, and Federal Reserve interest rate policy.
Guaranteed Loan
A loan where a third party (typically the government) guarantees repayment to the lender if the borrower defaults. SBA guarantees 75–85% of 7(a) loans, allowing banks to lend to small businesses with less collateral or shorter history than conventional loans would require.
Health Savings Account (HSA)
A tax-advantaged account for medical expenses available to individuals enrolled in a high-deductible health plan. Triple tax advantage: contributions are pre-tax, growth is tax-free, withdrawals for qualified expenses are tax-free. 2026 contribution limit: $4,300 (self), $8,550 (family). Unused funds roll over forever.
Home Equity Line of Credit (HELOC)
A revolving credit line secured by your home equity, with a draw period (typically 10 years) and repayment period. Rates are variable, tied to Prime Rate. In 2026, HELOC rates range 8–10%. Often used for home improvements or business financing. Putting your home at risk requires careful consideration.
IRS Form 1099
A series of forms used to report income other than regular wages. 1099-NEC: self-employment/contractor income over $600. 1099-K: payment card and app payments (Venmo, PayPal) over $2,500. 1099-INT: bank interest over $10. 1099-DIV: dividends. 1099-DA (new 2026): cryptocurrency transactions.
Index Fund
A mutual fund or ETF that tracks a market index (S&P 500, Total Market, Bond Market) with minimal management. Index funds have expense ratios of 0.03–0.20% vs. 0.5–1.5% for active funds. Historically, 80–90% of active managers underperform their index benchmark over 10+ years.
Internal Rate of Return (IRR)
The discount rate that makes the net present value of all cash flows equal to zero. IRR represents the annualized return of an investment accounting for the timing of all inflows and outflows. IRR is superior to simple ROI when evaluating investments with multiple cash flows over time.
IRS Wash Sale Rule
A regulation that disallows a tax loss deduction if you sell a security at a loss and repurchase the same or substantially identical security within 30 days (before or after the sale). Critical exception in 2026: cryptocurrency is classified as property, not a security — so the wash sale rule does not apply to crypto.
Liquidity
How quickly and easily an asset can be converted to cash without significant loss of value. Cash is perfectly liquid; real estate is illiquid (takes months to sell). Investments should be categorized by liquidity tier: Tier 1 (emergency fund, cash), Tier 2 (stocks/bonds), Tier 3 (real estate, business equity).
Marginal Tax Rate
The tax rate applied to the last dollar of income earned — your highest bracket rate. In 2026, a single filer earning $110,000 has a 22% marginal rate (dollars from $103,351–$197,300). This is the rate used to calculate the tax savings from deductions (a $1,000 deduction saves $220 in tax).
Mortgage Insurance (PMI)
Private Mortgage Insurance required when a borrower puts less than 20% down on a conventional mortgage. PMI protects the lender if the borrower defaults and typically costs 0.5–1.5% of the loan amount annually. PMI is automatically cancelled when your LTV reaches 78%, or you can request removal at 80% LTV.
Net Income
Total revenue minus all expenses, taxes, and costs — the actual profit ("bottom line"). For businesses: Net Income = Revenue – COGS – Operating Expenses – Interest – Taxes. Net income drives earnings per share (EPS) for public companies and determines distributions for business owners.
No-Doc Loan
A mortgage or commercial loan that does not require traditional income documentation (W-2s, tax returns). DSCR loans are the most common no-doc product in 2026, using rental income instead of personal income to qualify real estate investors. Also called asset-based lending.
Operating Expense (OpEx)
The ongoing cost of running a business, excluding the direct cost of goods sold. Includes rent, salaries, utilities, marketing, insurance, and administrative costs. OpEx is fully deductible in the year incurred (unlike capital expenditures, which are depreciated over years).
Owner's Draw vs. Salary
How business owners pay themselves. Sole proprietors and partnerships take "draws" — not subject to payroll taxes when taken but all profit is subject to self-employment tax anyway. S-Corp owners must take a "reasonable salary" and pay payroll taxes on it, while remaining profit passes through without FICA.
PITIA (Principal, Interest, Taxes, Insurance, Association)
The total monthly housing payment including all components: Principal (loan payoff), Interest (cost of borrowing), property Taxes, homeowners Insurance, and HOA/Association fees. DSCR lenders compare monthly rent income to PITIA to calculate the debt service coverage ratio.
Pre-Tax Deduction
Amounts subtracted from gross income before taxes are calculated — reducing taxable income and thus tax liability. Common pre-tax deductions: 401(k) contributions, HSA contributions, employer-sponsored health insurance premiums, FSA contributions. Every $1 of pre-tax deduction saves your marginal rate in tax.
Present Value (PV)
The current value of a future sum of money, discounted at a specific rate to reflect the time value of money. PV = FV ÷ (1 + r)^n. Concept: $1 received today is worth more than $1 received in the future because today's $1 can be invested to earn returns. Used in NPV analysis and loan pricing.
Prime Rate
The interest rate that banks charge their most creditworthy customers, typically 3% above the Federal Funds Rate. In April 2026, the WSJ Prime Rate is 6.75%. SBA loan rates are priced as Prime Rate + a spread (e.g., Prime + 3.0% for loans over $350,000 = 9.75% max).
Principal
The original loan amount borrowed, excluding interest. As you make loan payments, principal decreases over time (amortization). Interest is calculated on the remaining principal balance — which is why extra payments early in a loan save disproportionately large amounts of interest.
Qualified Business Income (QBI) Deduction
A pass-through deduction allowing eligible self-employed and small business owners to deduct up to 20% of qualified business income from their taxes. Made permanent by the OBBBA in 2026. Phase-outs apply at higher income levels for specified service trades. Reduces effective tax rate on pass-through income.
Reasonable Compensation (S-Corp)
The IRS requirement that S-Corp owner-employees receive a salary comparable to what a similar position would earn in the marketplace. The IRS scrutinizes S-Corps paying below-market salaries to reduce FICA taxes. In 2026, penalties for avoiding reasonable compensation include back payroll taxes plus interest.
REIT (Real Estate Investment Trust)
A company that owns income-producing real estate and trades like a stock. REITs must distribute 90%+ of taxable income as dividends. In 2026, U.S. REIT dividend yields average 4–6%. REITs provide real estate exposure without property management. Dividends are typically taxed as ordinary income.
Return on Equity (ROE)
Net income divided by shareholder equity, measuring profitability relative to money invested. A high ROE (above 15%) indicates efficient use of invested capital. Warren Buffett's threshold for "excellent" companies is sustained ROE above 15% without excessive leverage. S&P 500 average ROE: approximately 18% in 2026.
Risk-Adjusted Return
Investment return adjusted for the volatility or risk taken to achieve it. Sharpe Ratio = (Return – Risk-Free Rate) ÷ Standard Deviation. A 10% return from a volatile stock is less impressive than 8% from a more stable fund. Compare investments on risk-adjusted basis, not raw returns.
Roth IRA
An individual retirement account funded with after-tax money, where growth and qualified withdrawals in retirement are tax-free. 2026 contribution limit: $7,000 ($8,000 if age 50+). Income limits apply: phase-out begins at $150,000 (single) / $236,000 (MFJ). Superior to Traditional IRA if you expect higher taxes in retirement.
SDE (Seller's Discretionary Earnings)
A business valuation metric for smaller businesses: Net Income + Owner Salary + Owner Benefits + Non-Cash Charges (depreciation) + One-Time Expenses. SDE represents total economic benefit to a single full-time owner-operator. Businesses under $1M SDE are typically valued on SDE multiples; larger on EBITDA.
Sequence of Returns Risk
The risk that the timing of investment returns — especially negative returns early in retirement — can significantly reduce portfolio longevity. A 20% loss in year 1 of retirement followed by recovery is far more damaging than a 20% loss mid-career. The "bucket strategy" (holding 2–3 years of expenses in cash) mitigates this.
Social Security Wage Base
The maximum annual income subject to Social Security (OASDI) payroll tax. In 2026: $184,500. Income above this threshold is exempt from the 6.2% Social Security tax. High earners see their effective FICA rate drop dramatically once they exceed the wage base mid-year.
SOFR (Secured Overnight Financing Rate)
The benchmark interest rate replacing LIBOR for floating-rate financial products including adjustable mortgages, student loans, and commercial loans. SOFR reflects overnight borrowing rates in the U.S. Treasury repurchase market. SOFR + spread determines variable rates on many 2026 loan products.
Tax Basis
The original cost of an asset used to calculate capital gains or losses when sold. For stocks: price paid + commissions. For real estate: purchase price + improvement costs + closing fees – depreciation taken. Capital gain = Sale Price – Tax Basis. Accurate basis tracking prevents overpaying taxes.
Tax Loss Harvesting
Selling an investment at a loss to offset capital gains and reduce tax liability, then immediately repurchasing a similar (but not identical) investment to maintain market exposure. For stocks, the 30-day wash sale rule limits re-purchases. For crypto (classified as property), no wash sale restriction applies in 2026.
Total Cost of Ownership (TCO)
The full cost of owning an asset over its useful life, including purchase price, operating costs, maintenance, and disposal. For equipment, TCO includes the purchase price plus energy, maintenance, and downtime costs over 5–10 years. Often reveals that a cheaper purchase price leads to higher total cost.
Treasury Bond (T-Bond)
A U.S. government debt security with maturities of 10–30 years, paying semiannual interest. T-Bonds are considered risk-free because the U.S. government has never defaulted. The 10-year Treasury yield (approximately 4.5% in 2026) is a key benchmark for mortgage rates and corporate bond pricing.
Underwater Loan
When you owe more on a loan than the asset is worth (negative equity). Common in auto loans (high-LTV + rapid depreciation) and post-crash real estate. If you owe $28,000 on a car worth $23,000, you're $5,000 underwater. Refinancing or trading in becomes difficult without cash to cover the gap.
Variable Expenses
Costs that fluctuate based on activity level — unlike fixed expenses which stay constant. For businesses: COGS, sales commissions, shipping. For personal budgets: groceries, utilities, entertainment. Reducing variable expenses has immediate cash flow impact; fixed expenses require contract changes.
W-2 Employee vs. 1099 Contractor
W-2 employees have taxes withheld and receive employer benefits. 1099 contractors (self-employed) pay self-employment tax (15.3% on all income) and receive no employer benefits. A contractor earning $80,000 pays approximately $11,300 more in taxes than a W-2 employee at the same gross income. The premium must be factored into rate negotiations.
Working Capital
Current Assets – Current Liabilities. Measures a business's short-term liquidity and operational efficiency. Positive working capital indicates the business can meet short-term obligations; negative working capital is a warning sign. SBA loans for working capital have a maximum term of 10 years.
Yield Curve
A graph plotting interest rates of bonds with equal credit quality but different maturity dates. Normal yield curve: long-term rates higher than short-term (compensates for time risk). Inverted yield curve (short-term > long-term): historically precedes recessions by 12–18 months. The 2024 yield curve inversion signaled the 2025 slowdown.
401(k) Contribution Limit
The maximum annual amount employees can contribute to an employer-sponsored 401(k) plan. In 2026: $23,500 employee deferrals ($31,000 if age 50+ with $7,500 catch-up). Total limit including employer match: $70,000. Contributions reduce taxable income dollar-for-dollar in the year contributed (traditional 401(k)).
ACV (Annual Contract Value)
The average annualized revenue per customer contract, commonly used in SaaS valuation. A 3-year contract worth $150,000 has an ACV of $50,000/year. SaaS companies valued at 8–10x revenue often use ARR (Annual Recurring Revenue) and ACV as the core valuation drivers.
DSCR Lender Tier Pricing
Interest rate tiers based on a rental property's Debt Service Coverage Ratio. In 2026: DSCR ≥ 1.25 qualifies for Tier 1 (best rates); 1.00–1.24 adds 0.5–1.0% rate premium; below 1.00 triggers hard-money or no-ratio programs with significantly higher rates. Always aim for 1.25+ DSCR to access competitive institutional lending.
Employee Retention Credit (ERC)
A refundable payroll tax credit for businesses that retained employees during COVID-19 disruptions (2020–2021). The IRS has aggressively audited fraudulent ERC claims since 2023, with new enforcement escalating in 2026. Businesses that claimed ERC should assess their audit risk before the 5-year statute of limitations expires.
Labor Burden Rate
The total cost of an employee beyond base salary, expressed as a percentage of base pay. Includes mandatory taxes (FICA 7.65%, FUTA 0.6%, SUI), benefits (health insurance, 401k match), PTO, and overhead. In 2026, typical burden rates: 28–35% for office workers, 40–52% for construction. The true cost of a $75,000 salary is typically $95,000–$110,000.
Multi-State Tax Nexus
A legal threshold that requires a business or individual to pay income taxes in multiple states. Working remotely in a state different from your employer's state can create nexus, triggering taxes in both states (with partial relief from credits). In 2026, 17 states enforce "employer withholding" rules on remote workers.
Personal Injury Multiplier Method
The standard insurance method for calculating soft-tissue injury settlements: (Medical Bills + Lost Wages) × Multiplier. Multipliers range 1.5x (minor injuries) to 5x+ (serious/permanent injuries). Psychological factors (clear liability, medical documentation quality, sympathy factor) affect the multiplier applied.
Repayment Assistance Plan (RAP)
The new federal income-driven student loan repayment plan replacing SAVE after the One Big Beautiful Bill Act (OBBBA) in 2026. RAP payments = 10% of AGI ÷ 12 (minimum $10/month). No interest subsidy. Forgiveness after 30 years — but forgiven balances are taxable as ordinary income. Borrowers had until July 1, 2026 to switch from SAVE.
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