How to calculate taxable income

To calculate taxable income, subtract all deductions and allowance for exemptions from the adjusted gross income

Taxable income = adjusted income − (deductions + allowance for exemptions)

With deductions, you can itemize deductions or use the standard deduction

In 2009, the standard deduction is

11,400 USD for married couple filling a joint return

8350 for heads of household

5700 for singles and married individuals filling separately

If you itemize deductions, you can deduct taxes paid, mortgage interest, educational expenses, medical expenses, contributions, and other expenses that exceed 2% of your adjusted gross income.

A 3650 USD exemption was allowed for each dependent in 2009. This can always change. Hopefully, when it changes, it goes higher because it will reduce your taxable income even more

We now illustrate with real life examples

Example #1:

In 2009, Mike's adjusted gross income is 37,000 USD. Mike is married and has three kids. What is Mike's taxable income if he is filling a joint return and chooses to take the standard deduction?

Taxable income = 37,000 − (11,400 + 3650 × 3)

Taxable income = 37,000 − (11,400 + 10950)

Taxable income = 37,000 − 22350

Taxable income = 14650

Example #2:

In 2009, Sylvia's adjusted gross income is 50,000 USD. If Sylvia has 4 kids and decides to itemize the following items, calculate taxable income?

Taxes paid: 5000
Mortgage interest: 7000
Educational expenses: 4000
Medical expenses: 2000
Charitable contributions: 500
Expenses that exceed 2% of her adjusted gross income: 6000

Total deductions = 5000 + 7000 + 4000 + 2000 + 500 + 6000 = 24,500

Since Sylvia has 4 kids, her exemption is 3650 × 4 = 14,600

Taxable income = 50,000 − (24,500 + 14,600)

Taxable income = 50,000 − 39,100

Taxable income = 10,900

Notice that Sylvia's taxable income could have been a lot higher if she has taken the standard deduction of 11,400

It would be 50,000 − (11,400 + 14,600) = 50,000 − 26000 = 24,000

She will end up paying more taxes

Recent Articles

  1. How to Solve Logarithmic Equations

    Jul 06, 18 12:29 PM

    Learn how to solve two types of logarithmic equations

    Read More

New math lessons

Your email is safe with us. We will only use it to inform you about new math lessons.

            Follow me on Pinterest

Recent Lessons

  1. How to Solve Logarithmic Equations

    Jul 06, 18 12:29 PM

    Learn how to solve two types of logarithmic equations

    Read More

  Our Top Pages

Formula for percentage

Compatible numbers

Basic math test

Basic math formulas

Types of angles

Math problem solver

Algebra word problems

Surface area of a cube

Finding the average 

Scale drawings

Tough Algebra Word Problems.

If you can solve these problems with no help, you must be a genius!

Everything you need to prepare for an important exam!

K-12 tests, GED math test, basic math tests, geometry tests, algebra tests. 

Real Life Math Skills

Learn about investing money, budgeting your money, paying taxes, mortgage loans, and even the math involved in playing baseball.


Scientific Notation Quiz

Types of Angles Quiz

Graphing Slope Quiz

Adding and Subtracting Matrices Quiz  

Factoring Trinomials Quiz 

Solving Absolute Value Equations Quiz  

Order of Operations Quiz