In the United States, income tax is calculated based on your taxable income, which is your total income minus deductions and exemptions. The tax system is progressive, meaning that higher income levels are taxed at higher rates. Here’s a breakdown of the process:

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1. Calculate Gross Income

Gross income includes:

• Wages, salaries, and tips
• Business income
• Investment income (e.g., interest, dividends, and capital gains)
• Rental income
• Other sources, such as unemployment compensation, alimony (if applicable), etc.

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2. Subtract Adjustments to Income

Adjustments reduce your gross income to arrive at your Adjusted Gross Income (AGI). Examples include:

• Contributions to retirement accounts (e.g., 401(k), IRA)
• Student loan interest deductions
• Educator expenses
• Health Savings Account (HSA) contributions

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3. Subtract the Standard or Itemized Deductions

You can take either:

• Standard deduction (a fixed amount set by the IRS each year)
  • For 2024 (for example):
    • $13,850 for single filers
    • $27,700 for married couples filing jointly
• Itemized deductions, if they exceed the standard deduction. These may include:
  • Mortgage interest
  • State and local taxes (capped at $10,000)
  • Charitable contributions
  • Medical expenses (exceeding 7.5% of AGI)

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4. Apply Tax Rates (Progressive Tax Brackets)

After deductions, you get your taxable income, which is subject to federal tax brackets. For 2024, the tax brackets are as follows for single filers:

Tax Rate	Taxable Income Range
10%	Up to $11,000
12%	$11,001 – $44,725
22%	$44,726 – $95,375
24%	$95,376 – $182,100
32%	$182,101 – $231,250
35%	$231,251 – $578,125
37%	Over $578,125

Example Calculation: If your taxable income is $50,000:

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5. Account for Tax Credits

Tax credits directly reduce the amount of tax owed. Examples include:

• Child Tax Credit
• Earned Income Tax Credit
• Education Credits (e.g., American Opportunity Credit)

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6. Subtract Withholdings and Payments

Subtract any federal income tax withheld by your employer and estimated tax payments. If your payments exceed your tax liability, you get a refund; if not, you owe the difference.

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State Income Tax

Most states also impose income tax, which varies by state. Some states have flat rates, while others use a progressive system.

Updated Federal Tax Brackets for 2024 :

• Single Filers:
  • 10%: Up to $11,600
  • 12%: $11,600–$46,300
  • 22%: $46,300–$99,750
  • 24%: $99,750–$183,000
  • 32%: $183,000–$231,250
  • 35%: $231,250–$578,100
  • 37%: Over $578,100
• Married Filing Jointly:
  • 10%: Up to $23,200
  • 12%: $23,200–$92,600
  • 22%: $92,600–$199,500
  • 24%: $199,500–$366,000
  • 32%: $366,000–$462,500
  • 35%: $462,500–$693,750
  • 37%: Over $693,750
• Head of Household:
  • 10%: Up to $17,400
  • 12%: $17,400–$62,050
  • 22%: $62,050–$99,750
  • 24%: $99,750–$183,000
  • 32%: $183,000–$231,250
  • 35%: $231,250–$578,100
  • 37%: Over $578,100