Federal Income Tax Caculation
This calculator is to find out Your federal income tax for income within USA for 2018 to 2025. In 2017 Tax Cuts and Jobs Act (TCJA) was passed, which made a lot of changes in tax laws starting from 2018. These changes are set to expire at the end of year 2025, so unless Congress extends these, we'll revert back to tax laws of 2017 starting from tax year 2026. I had to modify the calculator significantly to account for all these changes, so I ended up making this new calculator. The calculator for years 2017 and before is now a separate calculator on the same page. Std deduction has been doubled while personal exemption has been eliminated, resulting in net wash (So, there is little incentive to itemize deductions). However, child credit has been doubled for every dependent child (<17 years), so that helps. In net, families with 2 or more kids may see lower taxes by about 5% compared to earlier years.
These are some of the other forms that you will frequently be using when filing your income tax return:
Form 1040 which is the final tax form used to submit your tax return has changed completely for 2018, where it's very simple 1 page with only 23 lines in it. However, number of lines keep increasing every year, so we may be back to long IRS forms pretty soon. From 2019, tax form went to 2 pages. IRS 1040 form for selected year is here:
It's a very simplistic calculator. It's only meant for people who are married, filing jointly, have only one working memeber and have a combined income between $100K - $500K. So, tax filing status only shows returns which are "married filing jointly", with only one W2 form. Calculator might still work for people making < $100K or more than $500K, but there are lot more credits at lower income, and lot more expiring deductions at higher income, which my calculator doesn't take into account. Nevertheless it can still give you a ballpark number. My calculator doesn' account for any extra payments sent out by government, or any new tax laws enacted as a one time thing during recessions etc.
- Schedule A for form 1040 => Used for itemizing deductions
- Schedule B for form 1040 => Needed to report interest and dividends from stocks
- Schedule D for form 1040 => Needed to report capital gain from stocks
- Schedule 1 for form 1040 => Needed to report additional income (1099-MISC income)
- Schedule 8812 for form 1040 => Needed to calculate credits fot children + other dependents
- Form 8889 => This is used to report your contribution to HSA, and qualified distributions taken out of them
- Form 8959 => Additional Medicare tax => This is for high earners (AGI > $250K) where they need to pay additional medicare tax
- Form 8960 => NIT tax => This is again for high earners only.
- Schedule 2 for form 1040 => This combines additional taxes from all other forms such as Form 8959, 8960, etc.
Calculator also shows Social security tax and medicare tax but not state income taxes. Note that social security tax and medicare tax have nothing to do with federal income tax, but you still fill that info with your income tax. These are used to figure out if you overpaid for them. This can happen for social security tax in situations where you have multiple jobs in a year, and each employer deducts social security tax assuming that's your only job. Excess payment for medicare tax is more common, as there is extra medicare tax for higher income, and employers usually deduct more than what they are supposed to deduct. Calculator also shows any child credit that you receive for kids or other dependents.
Calculator doesn't show any Premiums you pay for healthcare or contributions to HSA/FSA accounts. This is because all that money is taken out from your paycheck pre-tax, and hence your W2 earnings don't even show that. Also, your 401K retirement contrbution or your Employer's contribution are not shown in Calculator as they are taken out of your paycheck pre-tax, and hence your W2 earnings don't even show that. However, for 401K contributions, you still have to pay social security and medicare taxes, so they show up in your social security wages (box 3) and medicare wages (box 5).
This is how to use the calculator.
For most simplistic returns, only info from W2 form needs to be filled, since there are no other income sources. Enter the correct number of kids + other dependents, and leave all other entries at default of 0. For more involved forms, you will need to enter your income from other sources as stocks, banks, etc. You will usually get tax statements from all the places that will show you exactly how much money they paid you. You just have to enter the number from all those tax statements. Click on "calculate" to see the results.
- Enter Wages/Salaries from your W2 form box. If multiple W2 forms from one or both partners, add up wages. SS and medicare should be entered separately for each spouse, to check if either of them overpaid. Any excess SS tax paid will show up as credit on line 17 of form 1040
- Enter Total Interest that you received from banks/brokerage firms
- Enter Dividend and any capital gain/loss from your stock sale (short term is for stocks held less than a year) by adding them for all banks/brokerages.
- If you own house, enter Propery tax and Mortgage interest paid
- Enter all charity contribution, state income tax paid and all sales tax paid. If you do not want to save all sales tax receipt, you can use IRS sales tax calculator on irs.gov to give you a standard sales tax amount that you can use to deduct. The amount you get from there is usually much higher than the sales tax that you would have paid, so it's advisable to use standard sales tax amount
- Enter dependents (your children, and any other dependent who passes "residency test"). 2021 had increased amount of child tax credit => $3600 for children < 6 years and $3000 for children ages 6 through 17. For all other years, child credit = $2K for children < 17 yrs
- Enter Federal/SS/Medicare tax withheld from your paycheck. This is used to estimate your refund.