Taxable Income Calculator
Calculate your federal taxable income by combining all income sources, subtracting adjustments, and applying the standard or itemized deduction for your filing status.
How Taxable Income Is Calculated
Taxable income is the portion of your earnings that the IRS actually taxes. It is always lower than your gross income because several deductions are subtracted first.
The Step-by-Step Waterfall:
- Gross Income = W-2 wages + self-employment income + investment income + rental income + other income
- Adjusted Gross Income (AGI) = Gross Income − Above-the-Line Adjustments
- Taxable Income = AGI − Standard Deduction (or Itemized Deduction, whichever is greater)
Above-the-Line vs. Below-the-Line Deductions
Above-the-line deductions (adjustments to income) reduce your gross income to arrive at AGI. You can claim these even if you take the standard deduction. Common examples:
- Traditional IRA contributions (up to $7,000 / $8,000 if age 50+)
- Student loan interest (up to $2,500)
- Self-employed health insurance premiums
- HSA contributions
Below-the-line deductions come after AGI. You choose either the standard deduction OR your itemized total — whichever is larger.
2024 Standard Deductions
| Filing Status | Standard Deduction |
|---|---|
| Single | $14,600 |
| Married Filing Jointly | $29,200 |
| Married Filing Separately | $14,600 |
| Head of Household | $21,900 |
Taxpayers age 65+ or blind get an additional $1,550 (single) or $1,250 (married) per qualifying condition.
Worked Example
Sarah is single, earns $75,000 in W-2 wages, received $2,000 in dividends, and contributed $5,000 to a traditional IRA.
- Gross Income: $75,000 + $2,000 = $77,000
- AGI: $77,000 − $5,000 (IRA) = $72,000
- Taxable Income: $72,000 − $14,600 (standard deduction) = $57,400
AMT Note
High earners may owe the Alternative Minimum Tax (AMT), which applies its own exemption and rate structure. For 2024, the AMT exemption is $85,700 (single) and $133,300 (married). If your income is above these thresholds and you claim many deductions, consult a tax professional.
Pro Tips
- Self-employment income is taxed at both income tax AND self-employment tax (15.3%) rates. Deduct half of SE tax as an above-the-line adjustment.
- If your itemized deductions (mortgage interest + state/local taxes + charitable contributions) exceed the standard deduction, itemize.
- Retirement contributions are one of the most powerful ways to legally reduce taxable income.