1
US Tax Calculations        and REFUND                      1
2
GROSS INCOMEGross income includes wages and tips, interestand dividend earnings, unemploymentcompensation, and all other t...
3
ADJUSTMENTSAdjustments help you reduce the income on which you will betaxed. In fact, adjustments play a larger role in re...
DEDUCTIONSDeductions reduce your Adjusted Gross Income, lowering yourtaxable income, and therefore reducing the taxes you ...
DEDUCTIONSDeductions reduce your Adjusted Gross Income, lowering yourtaxable income, and therefore reducing the taxes you ...
How much is my standard tax deduction?                              2005              2006      Filing Status             ...
How much is my standard tax deduction?                                  2005                 2006      Filing Status      ...
6
EXCEPTION ALLOWANCEAn exemption is an amount of money you can subtract from yourAdjusted Gross Income, just for being you,...
TAXABLE INCOME                 7
TAXABLE INCOMETaxable income = Adjusted Gross Income- Standard Deduction (or ItemizedDeduction) - Personal Exemptions.    ...
FILING STATUSEveryone who files a federal tax return must determine whichfiling status applies to them. It’s important you...
FILING STATUSEveryone who files a federal tax return must determine whichfiling status applies to them. It’s important you...
FILING STATUS                9
FILING STATUSSingle filing status generally applies to anyone who isunmarried, divorced or legally separated according tos...
FILING STATUS                10
FILING STATUSA married couple may file a joint return together. Thecouple’s filing status would be Married Filing Jointly....
FILING STATUS                11
FILING STATUSA married couple may elect to file their returnsseparately. Each person’s filing status wouldgenerally be Mar...
FILING STATUS                12
FILING STATUS Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half t...
FILING STATUS                13
FILING STATUSYou may be able to choose Qualifying Widow(er)with Dependent Child as your filing status if yourspouse died d...
Schedule X — Single      If taxable income                          But not over--                      The tax is:       ...
Schedule Y-2 — Married Filing Separately      If taxable income      But not                    The tax is:            is ...
CREDITCredit reduces the tax you owe, dollar for dollar. Foreach dollar of credit, your tax is reduced by one dollar.Becau...
CREDITCredit reduces the tax you owe, dollar for dollar. Foreach dollar of credit, your tax is reduced by one dollar.Becau...
REFUND                                              Tax WithheldTaxpayers will get a tax refund, a refund on their US inco...
REFUND                                              Tax WithheldTaxpayers will get a tax refund, a refund   + on their US ...
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US Tax Calculations

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  • US Tax Calculations

    1. 1. 1
    2. 2. US Tax Calculations and REFUND 1
    3. 3. 2
    4. 4. GROSS INCOMEGross income includes wages and tips, interestand dividend earnings, unemploymentcompensation, and all other types of income notexempt from tax, before deductions and expenses 2
    5. 5. 3
    6. 6. ADJUSTMENTSAdjustments help you reduce the income on which you will betaxed. In fact, adjustments play a larger role in reducing taxes(or increasing credits) than deductions and exemptions.You can make adjustments for expenses such as:‣ Putting money into a retirement plan‣ Paying for self-employed health insurance‣ Paying interest on student loans‣ Contributing to a medical savings account‣ Paying moving expenses or alimony‣ Teaching supplies for qualified educators‣ Tuition and fees for qualifying educationsADJUSTED GROSS INCOME (AGI) 3
    7. 7. DEDUCTIONSDeductions reduce your Adjusted Gross Income, lowering yourtaxable income, and therefore reducing the taxes you must pay.You can take a standard deduction, based on your filing status,or itemized deductions, wherein, you can claim deductions forstate and local income taxes paid, real estate taxes, personalproperty taxes, mortgage interest, medical expenses, educationexpenses and charitable contributions.Allowing deductions is the government’s way of encouragingcertain types of spending such as charitable contributions, homeownership, entrepreneurship, environmental protection, andeducation. 4
    8. 8. DEDUCTIONSDeductions reduce your Adjusted Gross Income, lowering yourtaxable income, and therefore reducing the taxes you must pay.You can take a standard deduction, based on your filing status,or itemized deductions, wherein, you can claim deductions forstate and local income taxes paid, real estate taxes, personalproperty taxes, mortgage interest, medical expenses, educationexpenses and charitable contributions.Allowing deductions is the government’s way of encouragingcertain types of spending such as charitable contributions, homeownership, entrepreneurship, environmental protection, andeducation. 4
    9. 9. How much is my standard tax deduction? 2005 2006 Filing Status Standard DeductionSingle $5,000 $5,150Married filing a joint taxreturn or Qualifying $10,000 $10,300Widow(er)Married filing a separate $5,000 $5,150tax returnHead of Household $7,300 $7,550 5
    10. 10. How much is my standard tax deduction? 2005 2006 Filing Status Standard DeductionSingle $5,000 $5,150Married filing a joint taxreturn or Qualifying $10,000 $10,300Widow(er)Married filing a separate $5,000 $5,150tax returnHead of Household $7,300 $7,550 Individuals who are 65 or older increase the above amounts by $1,250 ($1,000 if married or a qualifying widow(er)) and by another $1,250 or $1,000 if they are blind. 5
    11. 11. 6
    12. 12. EXCEPTION ALLOWANCEAn exemption is an amount of money you can subtract from yourAdjusted Gross Income, just for being you, or havingdependents. Exemptions, then, reduce the amount of income onwhich you will be taxed.You get to take a personal exemption for yourself or your spouse,and you may get to take additional exemptions for people whoare your dependents. For 2006, for example, each exemption isworth $3,300. 6
    13. 13. TAXABLE INCOME 7
    14. 14. TAXABLE INCOMETaxable income = Adjusted Gross Income- Standard Deduction (or ItemizedDeduction) - Personal Exemptions. 7
    15. 15. FILING STATUSEveryone who files a federal tax return must determine whichfiling status applies to them. It’s important you choose yourcorrect filing status as it determines your standard deduction, theamount of tax you owe and ultimately, any refund owed to you. 8
    16. 16. FILING STATUSEveryone who files a federal tax return must determine whichfiling status applies to them. It’s important you choose yourcorrect filing status as it determines your standard deduction, theamount of tax you owe and ultimately, any refund owed to you.Your marital status on the last If more than one filing statusday of the year determines applies to you, choose theyour marital status for the one that gives you the lowestentire year. tax obligation. 8
    17. 17. FILING STATUS 9
    18. 18. FILING STATUSSingle filing status generally applies to anyone who isunmarried, divorced or legally separated according tostate law. 9
    19. 19. FILING STATUS 10
    20. 20. FILING STATUSA married couple may file a joint return together. Thecouple’s filing status would be Married Filing Jointly.If your spouse died during the year and you did notremarry within the same year, you may still file a jointreturn with that spouse for the year of death, providedthe joint return election is not revoked by a personalrepresentative for the deceased spouse. 10
    21. 21. FILING STATUS 11
    22. 22. FILING STATUSA married couple may elect to file their returnsseparately. Each person’s filing status wouldgenerally be Married Filing Separately. 11
    23. 23. FILING STATUS 12
    24. 24. FILING STATUS Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status. 12
    25. 25. FILING STATUS 13
    26. 26. FILING STATUSYou may be able to choose Qualifying Widow(er)with Dependent Child as your filing status if yourspouse died during 2004 or 2005, you have adependent child and you meet certain otherconditions. 13
    27. 27. Schedule X — Single If taxable income But not over-- The tax is: is over-- $0 $7,550 10% of the amount over $0 $7,550 $30,650 $755 plus 15% of the amount over 7,550 $30,650 $74,200 $4,220.00 plus 25% of the amount over 30,650 $74,200 $154,800 $15,107.50 plus 28% of the amount over 74,200 $154,800 $336,550 $37,675.50 plus 33% of the amount over 154,800 $336,550 no limit $97,653.00 plus 35% of the amount over 336,550Schedule Y-1 — Married Filing Jointly or Qualifying Widow(er) with dependent child If taxable income But not over-- The tax is: is over-- $0 $15,100 10% of the amount over $0 $15,100 $61,300 $1,510.00 plus 15% of the amount over 15,100 $61,300 $123,700 $8,440.00 plus 25% of the amount over 61,300 $123,700 $188,450 $24,040.00 plus 28% of the amount over 123,700 $188,450 $336,550 $42,170.00 plus 33% of the amount over 188,450 $336,550 no limit $91,043.00 plus 35% of the amount over 336,550 14
    28. 28. Schedule Y-2 — Married Filing Separately If taxable income But not The tax is: is over-- over-- $0 $7,550 10% of the amount over $0 $7,550 $30,650 $755.00 plus 15% of the amount over 7,550 $30,650 $61,850 $4,220.00 plus 25% of the amount over 30,650 $61,850 $94,225 $12,020.00 plus 28% of the amount over 61,850 $94,225 $168,275 $21,085.00 plus 33% of the amount over 94,225 $168,275 no limit $45,521.50 plus 35% of the amount over 168,275Schedule Z — Head of Household If taxable income But not The tax is: is over-- over-- $0 $10,750 10% of the amount over $0 $10,750 $41,050 $1,075.00 plus 15% of the amount over 10,750 $41,050 $106,000 $5,620.00 plus 25% of the amount over 41,050 $106,000 $171,650 $21,857.50 plus 28% of the amount over 106,000 $171,650 $336,550 $40,239.50 plus 33% of the amount over 171,650 $336,550 no limit $94,656.50 plus 35% of the amount over 336,550 15
    29. 29. CREDITCredit reduces the tax you owe, dollar for dollar. Foreach dollar of credit, your tax is reduced by one dollar.Because each credit whittles away your actual taxliability, credits are more valuable than deductions. Forinstance, if you are in the 25% bracket, and you get a$100 deduction, you may be able to knock $25 offyour taxes, but a $100 credit saves you $100.You may qualify for a credit for college tuition and fees,retirement savings contributions, or foreign taxes paid.Other credits aim to help children in school, adoptedchildren, the elderly, and the disabled. 16
    30. 30. CREDITCredit reduces the tax you owe, dollar for dollar. Foreach dollar of credit, your tax is reduced by one dollar.Because each credit whittles away your actual taxliability, credits are more valuable than deductions. Forinstance, if you are in the 25% bracket, and you get a$100 deduction, you may be able to knock $25 offyour taxes, but a $100 credit saves you $100.You may qualify for a credit for college tuition and fees,retirement savings contributions, or foreign taxes paid.Other credits aim to help children in school, adoptedchildren, the elderly, and the disabled. Income Tax Actual Tax 16
    31. 31. REFUND Tax WithheldTaxpayers will get a tax refund, a refund on their US income tax, if the tax they + owe is less than the sum of: Refundable Credits The total amount of refundable tax - credits that they claim. - Taxes The total amount of withholding that - they paid, whether it’s income tax withheld or estimated tax payments. Tax Refund 17
    32. 32. REFUND Tax WithheldTaxpayers will get a tax refund, a refund + on their US income tax, if the tax they Refundable Credits owe is less than the sum of: - Taxes The total amount of refundable tax credits that they claim. - The total amount of withholding that - they paid, whether it’s income tax withheld or estimated tax payments. Tax Due 17

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