How to Calculate What I Owe on Federal Taxes

By Carl Raimer
Form 1040 is the primary tax filing form.
tax forms image by Chad McDermott from

Calculating how much you owe to the Internal Revenue Service might seem like black magic, but it's surprisingly simple and well laid out by the IRS. Calculating federal taxes is made simpler with Internet and computer-based tax filing programs, but you may want a deeper understanding of the calculation and tax filing process.

Tally up all earnings for the filing year without subtracting deductions, taxes, and withholding. This amount is known as annual gross income.

Subtract the "standard deduction" from annual gross income. The standard deduction is based solely on filing status (such as single or filing jointly). In the 2009 tax season, this amount was $5,700 for single people or those married but filing separately and $10,400 for couples.

Subtract "personal exemptions" if you qualify. Unlike standard deductions, personal exemptions are only available to persons filing single who are not claimed as a dependent. The value for personal exemptions was $3,650 in 2009.

For example, a person with an annual gross income of $80,000 who is independent and filing single would be able to subtract the standard deduction of $5,700 and personal exemption of $3,650 from gross income. The result is $80,000 minus $5,700 minus $3,650 equals $70,650. This is known as adjusted gross income, or AGI.

Calculate income tax owed at each tax bracket. This is based on AGI and filing status and Resources has an in-depth view of the different tax brackets.

For example, for this person with an AGI of $70,650, his income taxes are 10 percent for income from $0 to $8,375, 15 percent from $8,375 to $34,000 and 25 percent from $34,000 to $82,400.

For the 10 percent bracket, the amount owed is computed by simply multiplying $8,375 (the maximum amount in the bracket) by 10 percent, equaling $837.50.

For the second bracket, the 15 percent rate is only applied to AGI between $8,375 and $34,000. Subtracting $8,375 from $34,000 equals $25,625, and $25,625 multiplied by 15 percent equals $3,843.75.

For the third bracket, the 25 percent rate is only applied to AGI between $34,000 and $82,400. Since the adjusted gross income was under the upper limit of the bracket, subtract $34,000 from it to calculate $36,650, and $36,650 multiplied by 25 percent is $9,162.50.

Sum the amounts for each bracket to determine how much federal income tax is owed.

For example, $837.50 plus $3,843.75 plus $9,162.50 equals $13,843.75.

About the Author

Carl Raimer is a doctoral candidate in the field of aerospace engineering. He has written an extensive amount of technical reports in his academic and professional career. He keeps a personal blog where he talks about science and computing.