Tax Calculator

This calculator estimates your federal income tax for 2025 or 2026, and tells you whether you are owed a refund or have a bill to settle. Fill it in from your W-2 and 1099s, which are the source of nearly every number it asks for, and the relevant box is noted beside each field. It decides for you whether the standard deduction or your itemized deductions produce the better result, and uses whichever is larger.

Working out taxable income

Everything starts here. Take your gross income, subtract the deductions you qualify for, and what remains is taxable income, which is the figure the tax brackets are applied to. It is worth being clear that the brackets never apply to your whole income. On the default figures, $80,000 of wages less the $15,750 standard deduction leaves $64,250 taxable, which produces $9,049 of tax and a 22% marginal rate but an effective rate of about 11.3%.

That gap between marginal and effective is the most misunderstood thing in income tax. The 22% applies only to the last slice of income, not to all of it. Earning one more dollar costs you 22 cents, but your average rate across every dollar is far lower.

Other income that gets taxed

• Interest income is generally taxed as ordinary income: bank accounts, CDs, and even interest paid on a tax refund. Municipal bond interest is the notable exception, being exempt from federal tax.
• Short-term capital gains come from assets held under a year and are taxed at ordinary rates, the same as your salary.
• Long-term capital gains come from assets held a year or more and get preferential rates of 0%, 15%, or 20% depending on where your income sits. Holding an asset one day past the twelve-month mark can therefore change the tax on the gain substantially.
• Ordinary dividends are taxed as regular income. Treat every dividend as ordinary unless it is specifically reported as qualified.
• Qualified dividends get the same preferential rates as long-term gains, but a dividend has to meet strict holding-period and payer requirements to qualify.
• Passive income comes mainly from rental property or businesses you do not materially participate in. The distinction matters because passive losses can generally only offset passive income; anything left over carries forward until you use it or sell the activity in a taxable transaction.
• Social Security is taxable only above a threshold. Up to 50% becomes taxable once provisional income passes $25,000 filing single or $32,000 jointly, and up to 85% above $34,000 and $44,000. Those thresholds have never been indexed for inflation, so more retirees cross them every year.

Exemptions

An exemption removes income from tax altogether rather than reducing it. Personal exemptions for taxpayers and dependents were eliminated in 2018 and replaced by a much larger standard deduction, so the term now shows up mostly in other contexts: charities and religious organisations are exempt from tax, duty-free shops sell goods exempt from certain taxes, and state and local governments are not subject to federal income tax.

Deductions: above and below the line

Deductions reduce the income that gets taxed, and they come in two kinds. The line in question is adjusted gross income, the figure at the bottom of the front page of Form 1040.

Above-the-line deductions come off before AGI is calculated, which makes them more valuable than they look. AGI drives eligibility for a long list of other breaks, so lowering it can unlock credits and deductions elsewhere. They are also allowed under the alternative minimum tax, and you can take them whether or not you itemize.

Modified adjusted gross income is AGI with certain deductions added back, and it is the figure used to test eligibility for many provisions. Among the items added back are student loan interest, half of self-employment tax, qualified tuition expenses, passive losses, IRA contributions, taxable Social Security, the exclusion for U.S. savings bond interest used for education, the adoption assistance exclusion, rental losses, losses from publicly traded partnerships, and the newer deductions for tips, overtime, car loan interest, and seniors.

Common above-the-line deductions

• Traditional IRA contributions. Most people with earned income can contribute, but the deduction phases out at higher incomes if you or a spouse are covered by a workplace retirement plan. Our IRA Calculator models the effect.
• Student loan interest, up to $2,500, reported in box 1 of Form 1098-E. It is unavailable to those married filing separately and phases out at higher incomes.
• Self-employment tax. Half of what you pay is deductible, which the calculator applies automatically when you report self-employment income.
• Tips. For tax years 2025 through 2028, up to $25,000 of qualified tips a year is deductible, phasing out above $150,000 of modified AGI, or $300,000 jointly.
• Overtime. Also for 2025 through 2028, up to $12,500 of qualified overtime pay, or $25,000 for joint filers, with the same phase-out thresholds.
• Car loan interest. Up to $10,000 a year on a loan used to buy a qualifying vehicle, for 2025 through 2028, phasing out above $100,000 of modified AGI, or $200,000 jointly.
• The senior deduction. For 2025 through 2028, filers aged 65 and over can claim an extra $6,000, or $12,000 for a couple where both qualify, phasing out above $75,000 of modified AGI, or $150,000 jointly.

Two commonly cited items no longer apply to most people. The moving expense deduction has been suspended since 2018 for everyone except active-duty military moving under orders. The separate tuition and fees deduction expired after 2020, and education costs now run through the credits described below instead.

Below-the-line deductions

Below-the-line means the standard deduction or itemised deductions on Schedule A, and you pick one, not both. A below-the-line deduction is worth exactly its face amount against taxable income: a $1,000 deduction reduces taxable income by $1,000.

• Mortgage interest on up to $750,000 of debt secured against a main or second home, including a home equity loan or line of credit used for the property. Unsecured personal loans do not count. The IRS reads "home" broadly enough to include a condo, co-op, mobile home, boat, or RV with sleeping, cooking, and toilet facilities. See the Mortgage Calculator.
• Charitable donations to qualified organisations. Cash handed to an individual, however deserving, is not deductible, and neither is a payment to a group that is not an IRS-recognised non-profit.
• Medical expenses above 7.5% of AGI, covering prevention, diagnosis, and treatment of physical or mental illness. Purely cosmetic procedures do not qualify. The 7.5% floor now applies at every age, having been made permanent; the older 10% figure no longer applies to anyone.
• State and local taxes, often shortened to SALT. You may deduct either income tax or sales tax, not both, plus property tax. For 2025 the cap is $40,000, rising to $40,400 in 2026, and it phases back down toward $10,000 once modified AGI passes $500,000 in 2025 or $505,000 in 2026. Anyone in a state without income tax is usually better off deducting sales tax.

Some less obvious costs qualify too:

• Out-of-pocket charitable costs. Buying paint to redecorate a church hall or ingredients to cook at a shelter counts, even though it is not a cash donation.
• Educator expenses. K-12 teachers can deduct classroom supplies, currently $300 a year and indexed, and this one is above the line, so it works without itemising.
• Babysitting during volunteer work. Payments to a sitter while you volunteer for a qualified charity can be treated as a charitable expense.
• Smoking cessation. Programs and prescription drugs to manage withdrawal count as medical expenses.
• Disaster recovery. Uninsured losses from a federally declared disaster can be deducted.

One item to strike from older advice: job-hunting costs. Miscellaneous itemised deductions subject to the 2%-of-AGI floor, which covered job searching, unreimbursed employee expenses, and tax preparation fees, were eliminated for individuals from 2018 onward.

Business expenses

A cost of carrying on a trade or business is deductible if the business is run to make a profit and the expense is both ordinary and necessary in that line of work. Keep them separate from personal expenses, from capital expenditures, and from the cost of goods sold, which are treated differently. Expenses of a sole proprietorship are deducted on Schedule C and therefore reduce AGI, making them above-the-line. The rules here run deep, and a business of any size is worth a professional's time.

Standard against itemised

Think of it as a restaurant offering a set menu or ordering à la carte. Itemising means totalling your individual deductions and claiming the sum; the standard deduction is a fixed amount requiring no receipts and no arithmetic.

Take the standard deduction unless your itemised total exceeds it, which is the whole test. For 2025 the standard deduction is $15,750 filing single and $31,500 filing jointly, with head of household in between. Because those figures are large, the great majority of filers now take the standard deduction, where before 2018 far more people itemised. Itemising means keeping records all year, so the effort only pays when the gap is real. This calculator computes both and applies whichever is larger, so you can see which side you fall on.

Tax credits

Credits are worth far more than deductions of the same size. A deduction cuts the income you are taxed on; a credit cuts the tax itself. A $1,000 deduction in the 22% bracket saves $220. A $1,000 credit saves $1,000.

The other distinction that matters is refundability. A non-refundable credit can take your tax to zero and no further, and anything unused is lost. A refundable credit pays out the difference as a refund even if your tax was already zero. Refundable credits are rarer and more valuable.

Income. The Earned Income Tax Credit is the big refundable one, aimed at low and moderate incomes, rising from the first dollar earned to a maximum, holding, then tapering away. Families with children receive substantially more. The Foreign Tax Credit is non-refundable and prevents the same income being taxed twice when earned abroad.

Children. The Child Tax Credit is worth up to $2,200 per qualifying child, of which $1,700 is refundable, and it phases out above $200,000 of income, or $400,000 jointly. The Child and Dependent Care Credit covers 20% to 50% of care costs, up to $3,000 for one dependent or $6,000 for two or more, for a child under 13 or a disabled spouse or dependent; the percentage falls as income rises. The Adoption Credit is non-refundable and covers qualified adoption expenses per child.

Education and retirement. The Saver's Credit gives 50%, 30%, or 10% of retirement contributions up to $2,000, or $4,000 jointly, depending on income; you must be 18 or over, not a full-time student, and not claimed as someone's dependent. The American Opportunity Credit is worth up to $2,500 per student for the first four years of higher education, and 40% of it, up to $1,000, is refundable. The Lifetime Learning Credit is up to $2,000 and covers graduate, undergraduate, and vocational study, but is entirely non-refundable. You can claim one or the other for a given student in a year, never both.

Environmental. Credits for residential clean energy cover solar, wind, geothermal, and fuel-cell systems, provided the electricity is used in the home, along with efficiency improvements such as insulation, exterior doors and windows, heat pumps, and qualifying heating and cooling equipment. These provisions have changed repeatedly, so check current rules before counting on them.

The alternative minimum tax

The AMT is a parallel calculation designed to stop high earners deducting their way to a very small bill. It ignores the standard deduction and disallows most itemised deductions, including state and local tax, then applies its own rates above an exemption amount. If the AMT figure exceeds your regular tax, you pay the AMT.

Far fewer people are caught by it than once were, because the exemption was raised sharply in 2018 and the SALT cap removed the deduction that used to trigger it. It still reaches taxpayers with large incomes, incentive stock option exercises, or unusual deduction patterns. Ways to reduce exposure include maxing out pre-tax retirement contributions to lower AGI, timing large deductions across years, and increasing charitable giving, which the AMT still allows. The IRS publishes an online AMT Assistant to check whether it applies. The line appears in the results here for completeness, but this calculator does not compute it.

Reading the result

The figure at the top is the difference between the tax you owe and the tax already paid through withholding, so a small number in either direction means your withholding was well set. A large refund is not a win; it means you lent the government money interest-free for a year. A large bill can mean penalties for underpayment.

Two extra taxes appear in the table. The net investment income tax adds 3.8% on investment income once modified AGI passes $200,000, or $250,000 jointly. Self-employment tax, at 15.3% of net earnings, applies if you work for yourself, though half of it is deductible.

Treat all of it as an estimate. This form condenses a very large body of law into a page, so it makes simplifying assumptions throughout, and state tax is approximated from the rate and withholding you enter rather than computed under your state's own rules. Use it to plan and to sanity-check a return, not to file one. Our Salary Calculator covers the paycheck side, and the Retirement Calculator the long view.