How to Calculate Fed Taxes

by Mark Kennan

Federal income taxes must be paid on an annual basis and are based roughly on how much income you have earned during the year. According to the Tax Policy Center, the federal government collected about 8 percent of the gross domestic product in income taxes in 2008, which equates to roughly 1.125 trillion dollars. In order to calculate your federal taxes, you need to know your filing status, how much taxable income you have earned during the year, what credits and deductions you are eligible to take and what the federal tax brackets are for the current year.

Determine your taxable income. You should consult the W-2 forms you receive from employers and any 1099 forms you receive showing interest income. If you receive any distributions from traditional IRAs or 401k plans, count this income as taxable pension income. Be sure to use these forms and not your salary expectations as the numbers might not match if you have made contributions with pretax dollars. For example, if your company would have paid you $50,000 but you had $5,000 put directly into your traditional 401k plan, your W-2 would only show $45,000 of taxable income. If you included $50,000 on your taxes, you would be unnecessarily paying taxes on an extra $5,000.

Determine which tax deductions you are eligible to take based on your expenses, filing status and income level. If the deduction is an above-the-line deduction, you should take automatically because it does not affect whether or not you can claim the standard deduction. If you are eligible for one or more itemized deductions, you need to total their value and compare it to the standard deduction. For example, if your itemized deductions are worth $12,000 and your standard deduction is only worth $5,450 it is worth losing the standard deduction to claim the itemized deductions.

Subtract the deductions you claim from your taxable income to calculate your adjusted gross income. This is the amount of money on which your taxes will be calculated.

Calculate the taxes on your adjusted gross income by using the appropriate federal income tax tables for your filing status. For example, if you are a head of household with $35,000 in taxable income, your taxes would be $4,652.50.

Subtract any federal tax credits that you are eligible for from your taxes found in step four. Popular tax credits for 2009 include the first-time home buyer's tax credit, energy efficiency tax credit and the Hope and Lifetime Learning tax credits for higher educational expenses. The result is your total tax bill.


  • Do not subtract contributions to your traditional IRA from your income in step 1 because those contributions qualify as a tax deduction rather than being made with pretax dollars. Though the effect is virtually the same, you must file your taxes properly for IRS purposes.

Items you will need

  • Income records
  • Federal tax tables

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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