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Income Tax Fundamentals and Calculations - Taxable Income

Taxable Income
How you determine your tax liability depends on the amount of your taxable income. If you have taxable income that exceeds $100,000, the taxpayer will need to use a tax computation worksheet to determine the income tax due. If taxable income is less than $100,000, you can simply use the IRS table to look up your tax. Since electronic filing has pretty much taken over, almost all software programs will calculate the taxable income for you, but you should still be aware of the basics for the exam.


Taxable Income = Adjusted Gross Income (AGI) less:

  1. Standard deduction or itemized deduction
  2. Personal exemption deductions
On the common Form 1040 tax return form, Taxable income is listed on Line 43.

Tax Liability
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