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Be Tax Savvy! The Basic Income Tax Calculation

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By Tanya Roth, Esq. on February 03, 2010 11:50 AM

 
So, you slaved away all year baking that fabulous cake.

But now, with April 15 around the corner, that mean-old IRS wants a bite of that cake. It's tax time and you have to fill out your Form 1040, also known as filing federal income tax returns. 

So how much cake will you give the IRS? 

Why the cake analogy? Well, federal income tax law is not the most user-friendly area of the law, not even for tax lawyers.  And frankly, income tax calculation can be quite boring to read about. 

Nobody likes taxes.

But cake- that's a different story.  Who doesn't like cake?

Let's pretend you baked a cake with chocolate frosting, sprinkles and cherries on top. You want to make sure that the IRS gets the smallest and most demure portion you can possibly give them.  This isn't because you dislike the IRS- not at all, in fact. They hold the purse strings of this great nation and help us fund all the wonderful projects that should (in theory) create jobs and nurse our tattered economy back to health. 

Nevertheless, you need to protect your piece of the cake; the cake you slaved away at baking and decorating.

So, what's the recipe for the IRS's piece?

It takes several steps to get to the final answer in that question. Throughout the Tax Savvy series, we'll address this "recipe" and help you understand your income tax calculation as well as income tax rules.  Of course, there is only so much you can write in a series of blog posts. Nothing in this tax series is meant to be a comprehensive analysis of federal income tax law. And no income tax rules discussed in this series should be used to avoid the payment of any tax liability. These income tax rules serve only as a primer. Use them to educate yourself on the questions that you may want to ask your tax professional.  

I'll end the first post with the first phase of income tax calculation, the basic tax equation. The amount of tax you will have to pay depends on what your adjusted gross income (AGI) is.  Throughout this series, we'll discuss the various deductions available in calculating your AGI.

     

[Gross income] - [Deductions] = Adjusted Gross Income

 

Other Posts to Come in this Series:

  1. What Is Gross Income, Anyway?
  2. Do Gifts = Income?
  3. Deduct Daycare Expenses 
  4. The Education Tax Deductions 
  5. Medical Expense Deduction
  6. So, You Married a Tax Cheat?
  7. Bad Debts or Gifts?

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