14 – U.S. Individual Income Tax Formula (Form 1040)

📘 U.S. Individual Income Tax Formula (Form 1040) :-

1️⃣ Gross Income
💰 Wages, business, rental, dividends, interest, Social Security, etc.

2️⃣ Less:  Adjustments (Above-the-line deductions)
✏️ Student loan interest, IRA contributions, HSA, SE tax deduction
= Adjusted Gross Income (AGI)

3️⃣ Less:  Standard Deduction OR Itemized Deductions
🏠 Mortgage interest, property taxes, medical, charity, etc.
= Taxable Income

4️⃣ Apply Tax Rates
📊 Federal tax brackets (10% – 37%)

5️⃣ Less:  Tax Credits
👨‍👩‍👧 Child Tax Credit, 🎓 Education Credits, 🌍 Foreign Tax Credit
= Tax Liability (before payments)

6️⃣ Less:  Payments & Withholding
🧾 W-2 withholding, estimated payments, refundable credits (EIC, CTC)

✅ Final Result = Tax Due 💵 or Refund 💸

👉 In short:
Gross Income – Adjustments = AGI → – Deductions = Taxable Income → – Credits & Payments = Tax Due or Refund