Filing Status & Tax Formula

Concept

The Tax Formula

Gross Income − Above-the-Line Deductions = Adjusted Gross Income (AGI). AGI − (Standard or Itemized Deductions) = Taxable Income. Taxable Income × Tax Rate = Tax Liability. Tax Liability − Credits = Tax Due (or Refund).

Concept

Filing Statuses

There are five filing statuses: Single, Married Filing Jointly (MFJ), Married Filing Separately (MFS), Head of Household (HOH), and Qualifying Surviving Spouse. Filing status affects tax brackets, standard deduction amounts, and eligibility for certain credits.

Key Point

AGI Matters

Adjusted Gross Income is a critical threshold. Many deductions, credits, and phase-outs are based on AGI levels. Always calculate AGI before determining final taxable income.

Gross Income: Inclusions & Exclusions

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Practice Questions