Federal Income Tax Formula

FEDERAL INCOME TAX FORMULA Gross Income Above the Line Deductions____ Adjusted Gross Income Itemized or Standard Deduction Exemptions_________________ Taxable Income x Applicable Marginal Tax Rates for Each Bracket Tax Liability Tax ascribe_________________ = TAX OWED ABRIDGED INCOME TAX ACCOUNTING I. Gross Income 61 A. Wages, Salaries, and Tips B. stake Income C. Dividend Income D. Other (Net) IncomeReduced by Deductible Expenses 1. State & Local Income Tax Refunds 2. criminal maintenance Received 3. Business Income or Loss 4. Capital Gains or losses 5. Taxable IRA Distributions, Pensions, & Annuities . Rents, Royalties, Partnerships, S-Corporations, Estates, Trusts 7. Unemployment Compensation & Social Security 8. Other Income II. Less Above the Line Deductions A. Unreimbursed Qualified Moving Expenses B.? of Self-Employment Tax C. Self-employed Health indemnity Deduction D. IRA Deduction E. Payments to Keogh Retirement Plan F. Penalty on Early Withdrawal of Savings G. S tudent Loan engagement 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 i)Misc. Deductions Subject to 2% AGI floor ii)Misc. Deductions Exempt from 2% AGI Floor B. Standard Deduction 63 IV. Less Exemptions = Taxable Income V. Tax Liability = Taxable Income x Applicable Marginal Tax Rates VI. Less Tax Credits A. Historical Building Rehabilitation B. Renewable Energy C. Work Opportunity Tax Credit D. Qualifying Child Tax Credit = TAX OWED