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Federal Individual Income Tax Fundamentals


Gross income
  • Salary

  • Commissions

  • Bonuses

  • Business income

  • Up to 85% of Social Security income

  • Farm income
  • Alimony received*

  • Unemployment income

  • Capital gains or losses

  • Dividends

  • Taxable interest
  • Rental property income

  • Taxable distributions from IRAs and retirement plans

  • S corporation and partnership income

  • Trust and estate distributions

  • Royalties
- Minus -
Adjustments to income
  • Alimony paid*

  • Student loan interest

  • Educator expenses

  • Tuition and fees**
  • Savings early withdrawal penalties

  • Self-employed SEP, SIMPLE, and qualified plan contributions
  • Self-employment tax (employer portion)

  • Self-employed health insurance

  • Health Savings Account (HSA) or Archer MSA Account deduction

  • IRA deduction
= Equals =
Adjusted gross income (AGI)
- Minus -
Standard deduction
or
Itemized deductions
  • Qualified mortgage interest

  • Charitable contributions

  • Casualty and theft losses
  • State and local income tax (or state and local sales tax)***

  • Medical expenses over 7.5% of AGI****
  • State and local real estate and property tax***

- Minus -
Qualified business income deduction
= Equals =
Taxable income
Calculate tax from tax table or tax rate schedules (and calculate Alternative Minimum Tax (AMT) if applicable).

Use Schedule D to calculate maximum tax on capital gains and qualifying dividends if appropriate.
- Minus -
Available credits
  • Elderly/disabled

  • Earned income

  • Child tax credit
  • Child and dependent care

  • Adoption tax credit

  • Retirement savings "savers credit"
  • Education tax credits

  • Foreign tax

= Equals =
Income tax liability

* For pre-2019 divorce. However, the divorce agreement can designate alimony as nontaxable and nondeductible.

** Unless extended by Congress, not available in 2018.

*** Total state and local taxes limited to $10,000 ($5,000 for married filing separately).

**** 7.5% in 2017 and 2018, 10% in 2019.



Prepared by Broadridge Investor Communication Solutions, Inc, Copyright 2011