The Internal Revenue Service has multiple ways to measure a taxpayer’s income. Just because you made a certain amount doesn’t mean you will pay taxes based on that amount. There is so much to do before it gets to that point. One of the most commonly asked things about the income measurements of a taxpayer is whether or not the standard deduction is before or after the adjusted gross income of a taxpayer. We’ll answer the commonly asked questions behind this while providing facts about the adjusted gross income and the standard deduction.
Before giving out an answer, let’s view the standard deduction and adjusted gross income.
What is the standard deduction?
The Internal Revenue Service doesn’t tax the actual income earned by the taxpayer during the tax year. Instead, the IRS looks at individuals in a similar way that it looks at businesses. Your certain expenses during the tax year aren’t taxable. Some taxpayers itemize their deductions for their qualifying expenses; some don’t. Those that don’t take the standard deduction which is a fixed amount changed every year by the IRS. The amount depends on the filing status of the tax year. It all comes down to how much they are eligible to write off of their gross income. If the qualified expenses are less than the standard deduction for their filing status, it’s wiser to claim the standard deduction instead.
The standard deduction for the 2021 tax season is $12,550 per individual who’s single and double that for married couples filing a joint return.
What is adjusted gross income?
The adjusted gross income is – well, the adjusted gross income of a taxpayer. After gathering your tax documents that report income known as the information returns, you will know about your gross income. The next step after calculating gross income is figuring out your adjusted gross income.
Your adjusted gross income is used for a lot of things like determining eligibility for certain tax deductions and credits. Calculate your adjusted gross income by filling out Schedule 1, Additional Income and Adjusted Gross Income. This tax form is oftentimes mandatory as there is a high chance that at least a few adjustments (above-the-line deductions) are available to you. File this tax form and you’ll know your adjusted gross income.
Correlation between adjusted gross income and standard deduction
Your adjusted gross income is one thing and your taxable income is another thing. If you’re planning on claiming the standard deduction on your tax return, you first need to figure out gross income, then adjusted gross income, and then finally, take off the standard deduction from your adjusted gross income. What you will be left after taking out the standard deduction from your adjusted gross income will be your taxable income. Depending on the highest tax rate that applies to you according to the current tax brackets, you will pay between 10 and 37 percent of your taxable income in taxes. However, this only applies up to a certain amount earned. Learn more about the federal tax brackets 2021.