How to Calculate an IRS Tax
- 1). Determine gross income. This is the sum of all money earned throughout the year before deductions and taxes. For example, someone with a salary of $80,000 would have a gross income of $80,000.
- 2). Apply the "standard deduction" by subtracting this value from the gross income. The standard deduction is determined based on filing status, and the amount can vary based on inflation rate. In 2009, a person filing single or married but filing separately can claim $5,700; a married couple filing together can claim $10,400.
For example, if the aforementioned person was single, he would subtract $5,700 from $80,000 to obtain $74,300. - 3). Apply personal exemptions by subtracting this value from gross income less the standard seduction. Personal exemptions are available to people filing single who do not have anyone claiming them as a dependent. In 2009, an independent person filing single was able to claim a personal exemption of $3,650. Gross income less deductions is known as adjusted gross income, or taxable income.
For example, subtracting $3,650 from gross income less standard deduction reduces the taxable income to $70,650. - 4). Calculate income tax at each tax bracket based on adjusted gross income and filing status. See Resources for a more in-depth look at the income tax rates for each tax bracket.
For example, for the single person with an adjusted gross income of $70,650, his income taxes are 10 percent for income from $0 to $8,375, 15 percent from $8,375 to $34,000 and 25 percent from $34,000 to $82,400.
For the first bracket of 10 percent, the tax owed is computed by simply multipling $8,375 (the maximum amount in the bracket) by 10 percent, equaling $837.50.
For the second bracket of 15 percent, only the amount earned between $8,375 and $34,000 is taxed this amount. Subtracting $8,375 from $34,000 equals $25,625. $25,625 is the amount that falls under 15 percent tax, and that amount is $3,843.75.
For the third bracket of 25 percent, only the amount earned between $34,000 and $82,400 is taxed this amount. Since the adjusted gross income was under the upper limit of the bracket, subtract $34,000 from it to calculate $36,650. $36,650 is the amount that falls subject to 25 percent tax, which equals $9,162.50. - 5). Sum the income taxes calculated at each bracket to determine the final income tax amount. For example, $837.50 plus $3,843.75 plus $9,162.50 equals $13,843.75.
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