Background edit
The amount of tax owed by an individual is determined by a tax formula that begins with the taxpayer's gross income, subtracts certain deductions from gross income to yield the taxpayer's adjusted gross income, then subtracts the greater of the standard deduction or itemized deductions as well as qualified business income deductions to yield the taxpayer's taxable income, then applies the appropriate tax rate to the taxpayer's taxable income to yield their gross income tax liability, and then finally subtracts tax credits from gross income tax liability to yield the amount of tax due:[1]
Standard deduction edit
Itemized deductions edit
State and local tax (SALT) edit
Mortgage interest edit
Student loan interest edit
Charitable donations edit
Medical expenses edit
Gambling loss edit
IRA and 401(k) contributions edit
References edit
- ^ Whittenburg, Gerald E.; Gill, Steven (2019). Income Tax Fundamentals 2020. Cengage. pp. 1–6. ISBN 978-0357108239.