Individual tax calculate in United State

January 1, 2024

Individual income tax in the United States is calculated based on a progressive tax system, which means that higher incomes are taxed at higher rates. Here's a basic overview of how individual income tax is calculated:

1. Determine Filing Status:

   • Single
   • Married filing jointly
   • Married filing separately
   • Head of household
   • Qualifying widow(er) with dependent child

2. Calculate Gross Income:

   • This includes all income from various sources, such as wages, self-employment income, rental income, dividends, and interest.

3. Subtract Adjustments:

   • Certain deductions, known as "above-the-line" deductions, are subtracted to arrive at the Adjusted Gross Income (AGI). These can include contributions to retirement accounts, student loan interest, and health savings account contributions.

4. Determine Standard Deduction or Itemize Deductions:

   • Taxpayers can either take the standard deduction or itemize deductions. Common itemized deductions include mortgage interest, state and local taxes paid, medical expenses, and charitable contributions.

5. Calculate Taxable Income:

   • Subtract the standard deduction or itemized deductions from the AGI to determine the taxable income.

6. Apply Tax Rates:

   • The United States has a progressive tax system with different tax brackets. For 2024 year tax brackets are 10%, 12%, 22%, 24%, 32%, 35% & 37% which are same as previous year 2023. However tax calculation on income range different for individual and married both for 2023 and 2024.

7. Calculate Tax Liability:

   • Apply the appropriate tax rate to the taxable income to calculate the federal income tax liability.

8. Tax Credits:

   • Tax credits, such as the Child Tax Credit or the Earned Income Tax Credit, can directly reduce the amount of tax owed.

9. Calculate Final Tax Due or Refund:

   • Subtract any tax credits from the calculated tax liability. If the result is positive, the taxpayer owes that amount. If negative, it represents a tax refund.

Various credits and deductions may apply depending on individual circumstances. Additionally, state income taxes and other taxes (e.g., Social Security and Medicare taxes) may also affect an individual's overall tax situation.