If you know your AGI or Adjusted Gross Income, then you can easily determine your tax liability by using the IRS Tax Table. Computing your tax liabilities for a specific tax period can be a really daunting task especially if you do not have some basic knowledge about taxes and basic tax calculations. Through the IRS Tax Table, taxpayers can now easily identify the amount they need to pay without doing any complicated math calculations. All you have to do is to prepare the items that the tax table requires such as your adjusted gross income, and filing status.
Your Adjusted Gross Income
To determine your , you should first record all the incomes you earned within the tax period. Make sure to properly estimate your gross income in order to make your tax calculations accurate as possible. The items that can be included as your gross income are wages or salaries from your work, income from pensions, interest incomes, and annuities. Add all these incomes and the result will be your gross income.
After determining your gross income, you should first deduct certain items like self-employment taxes, alimony, retirement plans, paid interest for educational loans, and moving expenses. The remaining amount can be considered as your AGI or Adjusted Gross Income. However, there may be certain that you incurred for your work, business or education. You can further deduct these deductions to reduce your total taxable AGI. If you do not want to spend your time itemizing your deductions, then you can also simply choose the standard deductions. After applying either the itemized or standard deductions, the remaining amount will be your final estimated taxable AGI. Now that you have your estimated AGI, you can now determine your tax liability by checking the IRS Tax Table.
At first, it can be intimidating and confusing especially with all those numbers, columns and rows in the IRS Tax Table, and especially if you do not where to start. But actually, the tax table is so easy to understand and use once you know your AGI and your filing status. Here is a sample and simple instructions in using the tax table.
Example is, you have an adjusted gross income of $45,000 and you are filing as a single taxpayer.
- The first step is to determine the specific row that indicates your adjusted gross income, which is $45,000. At the upper left corner of the tables, you will see the label ‘If line 43 (taxable income) is –‘. That is the column where you should look for your taxable income. You will see the amounts, which are usually grouped by a thousand increments. Go to the specific page that indicates 45,000.
- Once you are on that page, you will see that the first amounts indicated on the table under 45,000 are ’45,000 45,050’. That is exactly where your taxable income falls. At the right of the taxable income, there are four more columns. The first column is for the Single taxpayer, the second is for married filing jointly and widow(er), third column is for married filing separately, and the fourth column is for head of household taxpayers.
- Since you are a single taxpayer, the first amount after the taxable income column is your tax amount. With a $45,000 taxable income, and filing as a single taxpayer, your tax amount based on the IRS Tax Table is $7,381. If you got the same amount, then you know now how to use the tax table.
If you have higher or lower taxable income, simply find your taxable income on the first column of the IRS Tax Table. The amount where your taxable income and filing status cross is your total tax liabilities. You can also do manual calculations if you are really confused with the tax tables. However, computing tax liabilities can be more complicated if you have large taxable incomes that fall already on the 3rd or 4th tax brackets. If you have an income that falls on the , you are going to multiply specific amounts from your income by 10%, another by 15% and the remaining amount by 25%. If you have your AGI, it would be easier to know your tax liability by using the IRS Tax Table.