Personal Exemptions
Figuring Your Taxes
Figuring the amount of income taxes you owe for the year is a complex process that can be simplified by taking it one step at a time.
- Step 1: Add together your reportable income and subtract allowable deductions.
- Step 2: Figure your personal exemptions, which are deductions for you and your dependents.
- Step 3: Compute your regular tax liability. There are different ways to do this, depending on the amount of your income and whether you have certain types of income.
- Step 4: Add other taxes. Your regular tax liability isn't necessarily the amount you owe for the year. It may be increased by the alternative minimum tax (AMT), a separate tax system intended primarily for higher-income taxpayers. If you employ someone in your household, you become responsible for employer taxes on this household employee; this is an increase to your tax liability.
- Step 5: Subtract tax credits. Tax credits are dollar-for-dollar subtractions from your tax liability.
