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Can anyone explain how taxes are figured on the federal return?

I understand ordinary income goes by brackets but what about other income?
4 Replies
Opus 17
Level 15

Can anyone explain how taxes are figured on the federal return?

I don't quite understand your question.  

  • All your taxable income is added up--wages, investments, gambling prizes, taxable portion of social security benefits, and anything else.  That's your gross income.  
  • There are some special items that reduce your gross income, that gives you adjusted gross income.  
  • Then you subtract your deductions.  That gives you taxable income.
  • Taxable income is applied to the tax tables which use the tax brackets.  That give you your income tax amount.
    • However, if part of your income is from capital gains, that tax is computed according to different rules.  It gets added to your regular income tax.
  • Then there are tax credits, which are subtracted directly from your tax owed, instead of being subtracted from your taxable income like a  deduction.  That gives your total income tax.
  • Then you add self-employment taxes (if you are self-employed) and you add certain excise taxes and penalty taxes (such as early withdrawals from IRAs). That gives your total tax.
  • Your total tax is compared to your withholding and payments and you get a refund or owe additional money.


Bottom line, all your taxable income is included when applied to the tax brackets, not just wages. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Level 15

Can anyone explain how taxes are figured on the federal return?

that 'other income' is capital gains and qualified dividends and has its own brackets



2022 capital gains tax rates

Tax-filing status                        0% tax rate             15% tax rate                        20% tax rate


$0 to $41,675.

$41,676 to $459,750.

$459,751 or more.

Married, filing jointly

$0 to $83,350.

$83,351 to $517,200.

$517,201 or more.

Married, filing separately

$0 to $41,675.

$41,676 to $258,600.

$258,601 or more.

Head of household

$0 to $55,800.

$55,801 to $488,500.

$488,501 or more.

Level 15

Can anyone explain how taxes are figured on the federal return?

@jeffd some taxpayers have an excess of tax preference items. in those cases, after the income tax is calculated there is another calculation done on form 6251which takes these preferences into account and an alternative minimum tax is calculated (AMT). if the AMT is higher than the regular tax you pay the AMT tax. some of that AMT can become a credit to future years. 

Level 15

Can anyone explain how taxes are figured on the federal return?

The tax table is only used for ordinary income...essentially wages, and other simple income, Interest, pensions...

.......but NOT investment income..not capital gains and not Cap gains on a 1099-DIV form.

There are ~7 different tax calculations...based on exactly what information you entered...but usually, most folks use the "Qualified Dividends and Capital Gain tax worksheet"

1) If you used the Desktop software, open your tax file and look at the form 1040 in Forms Mode, and there is a worksheet  that shows what calculation method was used...and you can go to that calculation worksheet

2) If you used the Online software..log into that account, scroll down and click on ADD A STATE to open the 2021 return  then download a NEW PDF file of the  tax return in the PRINT CENTER ....the PDF file available after the end of the tax season  contains all of the forms and the backup worksheets used to prepare your tax file...the tax calculation worksheet should be in there. start by looking for the  "Qualified Dividends and Capital Gain tax worksheet",  and if that is not there, it would have to be on a different worksheet.  

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