Browse Income Tax Basics

Income Tax Basics

Core tax terms that explain how income becomes taxable income, how rates apply, and how liability is measured.

Income tax basics pages explain the main calculation chain that starts with income and ends with tax liability. If you are trying to understand how a return is built, this is the best place to start.

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What This Section Covers

  • The difference between broad income measures and the narrower amounts used later in the return.
  • The rate concepts that affect how additional income is taxed.
  • The calculation steps that connect income, deductions, and the final amount owed.
  • The household and eligibility concepts that influence later credits and filing choices.

In this section

  • Adjusted Gross Income
    Adjusted gross income is gross income after certain allowed adjustments and is a key pivot point for later tax calculations.
  • Dependent
    A dependent is a person a taxpayer may be able to claim for certain tax purposes, affecting credits, filing choices, and other return outcomes.
  • Effective Tax Rate
    The effective tax rate measures total tax relative to income and shows the overall tax burden rather than the top marginal rate alone.
  • Exemption
    An exemption is a tax concept that removes or excludes a person, amount, item, or transaction from a particular tax rule or tax calculation.
  • Gross Income
    Gross income is the broad starting measure of income before adjustments, deductions, and credits narrow the final tax result.
  • Marginal Tax Rate
    The marginal tax rate is the rate that applies to the next dollar of taxable income within the current bracket.
  • Modified Adjusted Gross Income
    Modified adjusted gross income is an adjusted version of AGI used by some tax rules to test eligibility, limits, or phaseouts.
  • Personal Exemption
    Personal exemption is the income-tax concept for an exemption amount tied to a taxpayer or qualifying person under the applicable law for the relevant tax year.
  • Tax Bracket
    A tax bracket is a range of taxable income that is taxed at a particular marginal rate under the rate schedule.
  • Tax Liability
    Tax liability is the amount of tax the return computes before comparing that amount with withholding, credits, and payments.
  • Taxable Income
    Taxable income is the amount left after relevant adjustments and deductions narrow the income that will actually be taxed.