The program is not working correctly.
The program is not functioning properly. just take the standard deduction so we would take the forty five thousand dollars minus ten thousand and that would get us to thirty five thousand dollars of taxable income
We are going to do a case study on taxes for someone bringing in $50,000 in gross income in the current tax year. We are not using the real tax brackets and tax rates of the United States, but instead simplified numbers for the sake of back of the envelope math.
Above the line deductions are deductions to gross income that can be made regardless of other deductions. Examples include 401k contributions, student loan interest payments, etc.
After deducting the above the line deductions, we are left with an adjusted gross income of $45,000.
We have two options for below the line deductions: itemizing or taking the standard deduction. If we itemize our deductions, we have a total of $9,000 in itemized deductions and our taxable income is $36,000. If we take the standard deduction instead, our taxable income is $35,000.