Last Updated 23 Jul 2020

Federal Income Tax Formula

Category Income Tax
Essay type Research
Words 245 (1 page)
Views 122


Gross Income - Above the Line Deductions_____.

Adjusted Gross Income - Itemized or Standard Deduction - Exemptions_____.

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Taxable Income x Applicable Marginal Tax Rates for Each Bracket Tax Liability - Tax Credits_____= TAX OWED ABRIDGED INCOME TAX ACCOUNTING

I. Gross Income [§ 61] 

  • A. Wages, Salaries, and Tips
  • B. Interest Income
  • C. Dividend Income
  • D. Other (Net)

Income—Reduced by Deductible Expenses

  1. State & Local Income Tax Refunds
  2. Alimony Received
  3. Business Income or Loss
  4. Capital Gains or Losses
  5. Taxable IRA Distributions, Pensions, & Annuities. Rents, Royalties, Partnerships, S-Corporations, Estates, Trusts
  6. Unemployment Compensation & Social Security
  7. Other Income

II. Less “Above the Line” Deductions

  • A. Unreimbursed Qualified Moving Expenses
  • B. Of Self-Employment Tax
  • C. Self-employed Health Insurance Deduction
  • D. IRA Deduction
  • E. Payments to Keogh Retirement Plan
  • F. Penalty on Early Withdrawal of Savings
  • G. Student Loan Interest Deduction
  • H. Alimony Paid
  • I. Tuition and Fees Deduction
  • J. Depreciation Deduction

“The Line” = Adjusted Gross Income (“AGI”)

III. Less the Greater of

  1. Itemized Deductions or
  2. the Standardized Deductions

A. Itemized Deductions:

  1. Medical and Dental
  2.  State Taxes
  3. Interest Expense on Qualified Mortgage Indebtedness
  4. Casualty & Theft Losses
  5. Miscellaneous Itemized Deductions
  6. Misc. Deductions Subject to 2% AGI Floor
  7. Misc. Deductions Exempt from 2% AGI Floor

B. Standard Deduction [§ 63]

IV. Fewer Exemptions = Taxable Income

V. Tax Liability = Taxable Income x Applicable Marginal Tax Rates

VI. Fewer Tax Credits

  • A. Historic Building Rehabilitation
  • B. Renewable Energy
  • C. Work Opportunity Tax Credit
  • D. Qualifying Child

Tax Credit = TAX OWED

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Federal Income Tax Formula. (2017, Jan 03). Retrieved from

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