US Citizen Income Tax Calculator

The free online income tax calculator can be used by independent contractors and salaried workers to determine their amount owed or their U.S. federal tax refund.

Income Subject to Taxation

Determining an appropriate taxable income is a prerequisite for calculating an estimated tax refund or due. When filling out the input fields, W-2 forms can be used as a guide. If applicable W-2 boxes can be removed from the form, they are shown to the side. Subtract exemptions and deductions, such as payments to a pension plan or 401(k), from gross income. The amount of taxable income should be the resultant sum.

Additional Taxable Income

Interest Income: The majority of interest, including interest received from CDs, checking and savings accounts, and income tax refunds, will be taxed as ordinary income. Private-activity bonds and municipal bond interest are two examples of exceptions.

Profit or loss from the sale of assets held for less than a year is referred to as short-term capital gains or losses. It is subject to regular income tax.

Profit or loss from the sale of assets held for a year or more is known as long-term capital gains or losses. The marginal tax rate on ordinary income determines the applicable taxation laws.

Ordinary Dividends: Unless otherwise noted, all dividends ought to be regarded as ordinary. Dividends are taxed like regular income.

Qualified Dividends: These are taxed at a lower rate than regular dividends, but at the same rate as long-term capital gains. For dividends to be legally defined as qualified, a number of strict requirements must be met.

Passive Incomes: Since taxpayers may claim passive losses, it’s critical to distinguish between passive and active income. Rental properties and enterprises that don’t demand material participation are the two main sources of passive income. Until it is used or deducted in the year the taxpayer disposes of the passive activity in a taxable transaction, any excessive loss on passive income may be accumulated.

Exclusions

In general, tax exemptions are financial exemptions intended to lower or even completely eliminate taxable income. For example, charities and religious organizations are typically exempt from taxes, therefore they are not limited to personal income tax. Duty-free stores offer tax-exempt shopping in several international airports. The exemption of state and local governments from federal income taxes is another example.

Deductions for taxes

Expenses give rise to tax deductions. By lowering the proportion of adjusted gross income that is taxed, they assist in lowering tax bills. Above-the-line (ATL) and below-the-line (BTL) itemized deductions are the two categories of deductions that lower taxes according to the marginal tax rate. The bottom figure on the front of Form 1040 is the taxpayer’s adjusted gross income (AGI), which is the “line” in dispute.

Adjusted Gross Income Modified (MAGI)

The primary purpose of MAGI is to ascertain a taxpayer’s eligibility for specific tax deductions. It is just AGI that has been adjusted for certain deductions. The following deductions are made:

• Interest on student loans
• Half of the tax on self-employment
• Tuition costs that qualify
• Deduction of tuition and fees
• Passive income or passive loss
• Contributions to an IRA and taxable Social Security benefits
• The exclusion for U.S. savings bond income
• The exclusion for adoption costs under section 137
• Losses from rentals
• Any total loss incurred by a publicly traded business

Extraordinary Deductions

Because ATL deductions reduce AGI, there is less income subject to taxes. These consist of the costs reported on Schedules C, D, E, and F as well as “Adjustments to Income.” The fact that ATL deductions are permitted under the alternative minimum tax is one of its benefits. The BTL choice of whether to itemize or take the standard deduction is unaffected by ATL deductions. For more specific information about how tax deductions are calculated, please visit the official IRS website. Here are a few typical ATL deduction examples.

• Contributions to a traditional IRA: Although most persons are able to make contributions to a traditional IRA, they are not always tax deductible. The person may have to lower or eliminate their IRA deduction if their Modified Adjusted Gross Income surpasses the annual restrictions.
• Interest earned on federal student loans is known as student loan interest. When lenders submit Form 1090-E after the first year, it should be in box 1. Married people who file separate returns are not eligible for this deduction. Additionally, if Modified Adjusted Gross Income surpasses the annual thresholds, this deduction cannot be claimed. The 2024 claim limitation is $195,000 for joint filers and $95,000 for single, head-of-household, or qualified widowers.
• According to IRS guidelines, eligible tuition and fees must be considered educational expenses. Married people who file separate returns are not eligible to claim this deduction. It is not possible to combine this deduction with an educational tax credit.
• Moving expenses: As long as the taxpayer’s employer does not repay them, the expenditures of moving household possessions from one home to another for employment or business purposes are typically entirely deductible. The distance between the taxpayer’s prior residence and their new workplace must be at least fifty miles.

Subordinate Deductions

The Standard Deduction or Itemized Deductions from Schedule A are referred to as BTL deductions. A BTL deduction can never exceed the actual deduction amount. A $1,000 deduction, for instance, can only lower net taxable income by $1,000. For more specific information about how tax deductions are calculated, please visit the official IRS website. Basic details and examples of typical BTL deductions are provided below.

• Mortgage interest can be used to a home equity loan, a second mortgage, a line of credit, or a standard mortgage up to a specific amount, such as $750,000 in 2024 and $1,000,000 in 2025. Personal loans, which are not deductible, are defined as loans that are not secured by a home. According to the IRS, a “home” can be any of the following: a house, condo, co-op, mobile home, boat, or recreational vehicle.
• Donations to charity: Tax deductions are only available for contributions to eligible charities. Payments to neighborhood organizations that the IRS does not consider non-profit or handouts to the homeless are not deductible.
• Medical expenses: Any costs incurred to prevent, diagnose, or treat physical or mental illness, as well as any sums spent to treat or alter bodily parts or functions for the sake of health, may be written off. Cosmetic surgery costs are not covered by insurance. Only expenses exceeding 10% of adjusted gross income (or 7.5% for those 65 and older) can be deducted when premiums are paid with after-tax cash. Keep in mind that contributions to health savings accounts are ATL deductions.
• Sales and local tax: This federal deduction, sometimes known as SALT (state and local tax), may be either sales tax or income tax, but not both. It is likely more advantageous for taxpayers who reside in states without income taxes to claim the deduction from their sales tax. This deduction cannot be greater than $10,000 in 2024 and 2025.

The majority of BTL deductions are the standard types mentioned above, along with a few others like tax preparation expenses or investment interest. Nonetheless, the IRS permits the deduction of specific expenses, which might lower tax obligations. Below are some examples, however they are not all of them. Go to the official IRS website for further details.

• Charitable contributions made out of pocket: In addition to gifts to charitable organizations, charitable work expenses such as purchasing paint for a cathedral’s walls or food for a homeless shelter can also be written off.
• Teacher tax savings: Under this deduction, K–12 teachers can write off up to $250 annually for school supplies.
• Paying babysitters: It may surprise you to learn that you can deduct any childcare payments you make to a babysitter if you volunteer at a non-profit while they watch your children at home!
• Job searching: If the costs incurred during the job search surpass two percent of adjusted gross income, the qualifying expenses over the threshold can be written off. This is determined by itemizing the costs related to the job search. Printing business cards, resumes, and the mileage to and from interviews are a few examples of such out-of-pocket costs.
• Quitting smoking: Completing a smoking cessation program may qualify as a medical tax deductible. Prescription medications used to lessen nicotine withdrawal may also qualify for the deduction.
• Disaster recovery: Uninsured recovery expenses may be written off if a natural disaster damages a taxpayer’s residence and the taxpayer needs federal assistance.

Costs associated with the business

If a business is run to turn a profit, then any expenses related to operating the business or trade can typically be written off. But it has to be both commonplace and essential. Make an effort to distinguish between expenses used to calculate the cost of goods sold and additional capital or personal expenses. Since they are subtracted to determine AGI after being deducted on Schedule C, all business expenses incurred while operating as a sole proprietorship are regarded as ATL.

Expenses associated with a business are complicated and subject to numerous regulations. While many will be BTL deductions, some may be ATL deductions. Therefore, it could be wise to refer to the IRS’s official regulations regarding the deduction of business expenses.

Itemized versus Standard Deductions

Use the example of a restaurant offering two meal selections to illustrate the distinction between basic and itemized deductions. The first is the a la carte, which enables the consolidation of several goods to arrive at a final price and is comparable to an itemized deduction. The standard fixed-price meal option is the second choice; it is comparable to the standard deduction in that the majority of the items are pre-selected for ease. This is a broad comparison between itemized versus standard deductions, but it is not as straightforward as it is presented here.

Because the sum of their itemized deductions exceeds the standard deduction—the bigger the deduction, the lower the taxes paid—the majority of taxpayers who decide to itemize do so. But this is typically more time-consuming and necessitates keeping a large number of receipts. All taxpayers have the option to choose the standard deduction, which is what most people choose to do, rather than laboriously itemizing many of the potential deductions mentioned above. Because it is the simplest and saves time, some people choose the standard deduction. Congress sets the annual standard deduction, which is a fixed amount. It is slightly higher in 2025 ($14,600 and $29,200) for single taxpayers and $15,000 for married taxpayers filing jointly.

The calculator takes the bigger of the two figures to estimate the amount of tax due or owed and automatically decides, based on inputs, whether the standard or itemized deduction will result in the highest tax savings.

Credits for taxes

Tax credits are created and distributed by Congress to taxpayers who they believe would benefit society, such as those who adopt eco-friendly habits, save for retirement, adopt a child, or attend school. By immediately lowering the amount of tax due, they assist taxpayers in paying lower tax bills. A $1,000 tax credit, for example, will lower a $12,000 tax obligation to $11,000. Deductions, on the other hand, simply lower taxable income. Therefore, when compared to a dollar-equivalent deduction, a tax credit is typically more effective at lowering the total tax liability.

Differentiating between refundable and non-refundable tax credits is crucial. Non-refundable credits can lower the overall tax obligation to zero, but not more. Non-refundable tax credits that are not used will run out and cannot be rolled over to the following year. However, whether or not their tax burden falls below zero, taxpayers are entitled to the full amount of refundable tax credits. The difference will be issued as a tax refund if it is less than $0. Compared to non-refundable tax credits, refundable tax credits are less prevalent.

For simplicity’s sake, our Income Tax Calculator only has input areas for certain tax credits due to the intricacy of income tax computations. These can be manually entered in the “Other” column, though. Just make sure you use IRS guidelines to get the accurate amounts for each tax credit. The descriptions that follow are also simple summaries. For more specific information about how tax credits are calculated, please visit the official IRS website.

The four categories below provide examples of some frequent tax credits.

Revenue

One of the most well-known refundable tax credits is the Earned Income Tax Credit, which is often only accessible to low- to moderate-income households earning up to slightly over $50,000, depending on other factors. From the first dollar of profits until the credit reaches its maximum, it is equivalent to a certain proportion of earnings. Until earnings hit a certain threshold, the maximum credit is paid; after that, it decreases with each further dollar of income until no credit remains. Compared to families without qualifying children, those with children earn a significantly greater credit. This credit can be refunded in most cases.

A non-refundable credit known as the Foreign Tax Credit lessens the double taxation burden on taxpayers who get their income from sources outside of the United States.

Kids

kid Tax Credit: Up to $2,000 can be claimed for each kid, with $1,400 of the amount being refundable. The phase-out of the child tax credit begins when the income hits $200,000 ($400,000 for joint taxpayers).

kid and Dependent Care: You can claim a tax credit for 20% to 35% of your eligible expenses up to $3,000 for each kid under the age of 13, a parent or spouse with a disability, or another dependent care expense. This tax benefit, like many others, is dependent on income level.

Adoption Credit: Whether a child is adopted domestically, internationally, or through public foster care, this non-refundable tax credit covers eligible costs up to a specific amount for each adopted kid.

Retirement & Education

Taxpayers with low and moderate incomes are encouraged to contribute to qualifying retirement accounts via the non-refundable Saver’s Credit. Depending on adjusted gross income, contributions to retirement accounts up to $2,000 ($4,000 if married filing jointly) may be credited at a rate of 50%, 30%, or 10%. Not a full-time student, must be at least eighteen, and cannot be claimed as a dependent on the return of another individual.

The American Opportunity Credit is typically awarded for approved educational costs incurred during an eligible student’s first four years of college. Each student may receive up to $2,500 in credit per year. 40% of the remaining amount, up to $1,000, may be reimbursed if the credit reduces the tax obligation to zero.

In contrast to the education tax credit directly above it, the lifetime learning credit can be applied to professional or vocational courses, graduate school fees, and undergraduate education. For qualified students, it can go up to $2,000, but there is no reimbursement at all.

Either the Lifetime Learning Credit or the American Opportunity Credit may be claimed in a given year, but not both.

The environment

Residential Energy Credit: Homes that use fuel-cell, geothermal, wind, or solar energy systems may be eligible. Nevertheless, the electricity produced by these sources needs to be utilized within the house.

Non-business Energy Property Credit: Materials and equipment that satisfy the Department of Energy’s technical efficiency requirements are eligible. Home insulation, external doors, exterior windows and skylights, and specific roofing materials are examples of the first category, which is described as any eligible energy efficiency upgrades. Electric heat pumps, air conditioners, biomass-fuel stoves, natural gas furnaces, and hot water boilers are examples of the second category, which is referred to as domestic energy property costs.

Plug-in Electric Motor Vehicle Credit: Purchasing an eco-friendly electric car can result in a tax credit of up to $7,500. It is mostly utilized in the United States and must be purchased fresh new for use or leasing, not for resale.

AMT, or alternative minimum tax

An obligatory substitute for the regular income tax is the AMT. The standard deduction is not taken into account when calculating the AMT amount. Additionally, it excludes the majority of itemized deductions, including business expenses, mortgage interest, property taxes, and state and local income taxes. Taxpayers must pay the larger amount of either the AMT or their regular income tax if their income exceeds the AMT exemption level. Many people in higher tax brackets are impacted by the AMT since it removes many of the Many people in higher tax brackets are impacted by the AMT since it removes many of the deductions. Nonetheless, there are methods to attempt to evade paying the AMT:

• Reduce adjusted gross income by making the maximum possible contributions to health savings accounts, 401(k)s, and IRAs.
• Cut down on itemized deductions
• Boost donations to charities

In general, the AMT should only be a concern for taxpayers whose adjusted gross earnings beyond the exemption. To determine if a taxpayer might be impacted by the AMT, the IRS offers an online AMT Assistant.