Accounting & Tax Definitions -- H

Hardship Withdrawal: A withdrawal from a section 401(k), section 403(b), or section 457 plan that is permitted when the plan participant has an immediate and heavy financial need and the withdrawal is necessary to meet that need.

Head of Household: The filing status used by an unmarried taxpayer who pays over half the cost of maintaining his home that is the principal residence for over half the tax year of his unmarried child or other lineal descendent (this child does not have to be a dependent) or of his dependent married child or other qualified relative. A dependent parent who does not live with the taxpayer may also qualify the taxpayer for the head of household status if qualifications are met.

Hobby Loss: A nondeductible loss arising from a personal hobby as contrasted with a loss arising from an activity engaged in for profit.

Holding Company: A corporation that has no other function except owning other corporations.

Holding Period: The period of time property has been owned for income tax purposes. The holding period determines if gain or loss from the sale or exchange of a capital asset is long or short term.

Home Equity Loan: Loan in which the lender allows the borrower to use the equity in his or her home as collateral for a line of credit or revolving credit. The borrower may then obtain cash advances by using a credit card or checks up to some predetermined limit.

Home Office Expenses: Expenses of operating a portion of a residence used for business or employment-related purposes. Several restrictions limit the deduction for home-office expenses.

Hope Scholarship Credit: A nonrefundable credit of up to $1,500 per qualified student for tuition and fees paid for the first two years of post-secondary education.

Horizontal Equity: Horizontal equity says that people in the same income groups should be taxed at the same rate. "Equals should be taxed equally."

Household Employee: An individual who performs nonbusiness services for the taxpayer in or around the taxpayer's home. Such services include child and dependent care, house cleaning, cooking, and yard work.

Household Expenses: A portion of total support; the value of lodging plus food consumed in the home, utilities paid, and repairs made. The total is divided equally among all family members. Each member's share of household expenses is part of his or her total support.

Husband and Wife: A status that, among other things, entitles a couple to file a joint income tax return. For the purpose of joint returns, common-law marriages are recognized only if the state in which the two persons reside recognizes such marriages or if the state in which the marriage began recognizes common-law marriages. The status as husband and wife on the last day of the tax year governs the right to file a joint return.

Hybrid Method of Accounting: A combination of accounting methods, usually of the cash and accrual methods.