Taxable income is the portion of someone's income that is the subject of taxation according to the laws the decide what is the income and taxation rate for that income.
Initially I thought that the definition of taxable income was going to be more complex and difficult to explain then what it actually is. According to our text section 3.2 of Personal Finance taxable income is defined as the amount of income that is subject to taxes under the law.
Taxable income is a major determinant of whether you must file a tax return and this also determines the amount of taxes one may or may not have to pay. The IRS internal revenue service defines your adjusted gross income as the total of your earned income (e.g., salaries, wages, tips, bonuses, commissions) plus unearned income (e.g., interest, dividends, capital gains, rents, royalties, gambling winnings, net business income) minus certain allowed adjustments. Individual’s are allowed to subtract certain amounts from their AGI (income for the year) to obtain taxable income. The most important ones are called exemptions and deductions; you get a personal exemption for each qualifying person in your household, including yourself and each dependent. You also receive a standard deduction for certain qualifying expenses on which you are not taxed.
Additionally, to exemptions and deductions, you can also use certain tax credits to reduce the taxes you owe and they do not represent adjustments to your income, but are subtracted directly from the taxes you owe. To find how much tax you owe you must calculate income from all sources less exclusions for total income, minus adjustments to total income for your adjusted gross income, minus standard deduction or itemized deductions and exemptions to equal taxable income. Look up your tax in the tax tables, equals tentative tax, minus credits to equal total tax owed then you minus the taxes you have already paid through payroll withholding and estimated taxes to equal your balance due or amount of refund.
I too use a “tax preparation service”. H & R Block is the name of the service. Sometimes I do their rapid refund service, and other times I will just use their software on my own computer at home and file on my own. The reason I use it is to get rapid refund. I normally need the money urgently. However, after starting a savings account I may change the way I do my taxes. I am somewhat knowledgeable of completing tax forms because of my family, however, as you stated “time is an issue”. Additionally, although it is costly Hand R block offers a service where we can get money write before Christmas. With two children and one on the way it is very helpful. Thankfully, we do receive college credit. Great post!
Taxable income is the income earned by an individual, or family, that can be taxed, although adjustments are allowed by federal laws.
To find out approximately what you owe you must collect all sources of income, less any that are excluded, and add them together to come up with your total income. Once you make adjustments to your taxable income you end up with the adjusted gross income, or AGI. From the AGI you subtract any, and all allowed, standard or itemized deductions. After deductions are accounted for you are permitted to subtract from this, exemptions, which will give you your taxable income. To find the tentative tax, you must locate your taxable income on the Tax Table. From the tentative tax you deduct any credits you receive, and then you have the taxes owed. If you have paid any prior to tax season, then you can deduct that from what is owed. The last, and final stage, is the amount that is due or the refund to be paid to the individual filing the taxes.
DQ2 There are a number of ways to fill out tax return. If you prepare your own…