Tax Year
The 12-month period for which taxes are calculated and reported.
A tax year is the annual accounting period for which income is reported and taxes are calculated. Most individuals and many businesses use the calendar year (January 1–December 31). Some businesses use a fiscal year ending on a different date. Changing your tax year requires IRS approval, and short tax years may result when transitioning.
Example
A sole proprietor reports all income and expenses from January 1 through December 31, 2024 on her 2024 tax return filed by April 15, 2025.
Why It Matters for Your Business
Your tax year determines filing deadlines, which transactions fall into which year, and when deductions and income recognition strategies take effect.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
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