Individual Taxation
Individual taxation covers the rules for computing taxable income, deductions, credits, and tax liability for individual taxpayers under the Internal Revenue Code.
Explanation
Individual taxable income starts with gross income (wages, interest, dividends, business income, capital gains, etc.), reduced by adjustments (above-the-line deductions) to arrive at adjusted gross income (AGI). Taxpayers then subtract either the standard deduction or itemized deductions and qualified business income deductions to reach taxable income. Tax is computed using progressive brackets, then reduced by credits. Understanding filing status, dependency rules, and the interplay of AGI-based phase-outs is critical.
Key Points
- •Gross income minus adjustments = AGI; minus deductions = taxable income
- •Standard deduction vs. itemized deductions (SALT, mortgage interest, charitable)
- •Filing status determines brackets and standard deduction amounts
Exam Tip
Know which deductions are above-the-line (adjustments to income) versus below-the-line (itemized) — this distinction affects AGI and multiple phase-outs.
Frequently Asked Questions
Related Topics
Tax Credits
Tax credits directly reduce tax liability dollar-for-dollar and are more valuable than deductions, which only reduce taxable income.
Basis Calculations
Basis is the amount of a taxpayer's investment in an asset for tax purposes, used to determine gain or loss on disposition and depreciation deductions.
Test your knowledge
Practice scenario-based questions on this topic with detailed explanations.