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H&R Block's 2018 free income tax calculator is a simple tool to help you easily estimate your tax refund or how much you'll owe, plus the impact of tax reform on you.
Most of us have a responsibility to pay federal personal income tax, whether it is withheld from our paychecks or we pay it ourselves. But how is income tax calculated? What does the tax return calculator consider? And how can you lower the amount you owe? How will the tax reform bill affect how much you pay? Read on to learn more about federal income tax!
Tax brackets are often confused with tax rates, but the terms aren't interchangeable. Each bracket holds an amount of taxable income that applies to a tax rate between 10%-37%. In other words, each layer of your taxable income that falls inside a certain bracket is taxed at that bracket's rate. As your income grows, the next layer of taxable income is taxed at the next tax bracket's "marginal" rate. Tax reform changed the income tax brackets and tax rates for many filers, so it's important to learn more about how this may affect you.
Filing status is a factor in how much tax is calculated at a certain level of taxable income. It's also tied to the eligibility ranges for certain deductions, credits, and exemptions. Your filing status will be one of the following: Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Widow(er). Select your status on the tax refund and tax reform calculator above.
Prior to the Tax Cuts and Jobs Act (TCJA), an exemption amount ($4,050 in 2017) could be claimed for the taxpayer, the taxpayer's spouse, and for each eligible child. Tax exemptions lowered taxable income, resulting in a lower tax bill. However, the TCJA eliminated personal and dependent exemptions, and instead increased the size of the standard deduction.
Income that is taxable can include salaries, wages and other forms of compensation, as well as income from self-employment, investments, rental property, and many other sources. Take a look at our complete list of taxable income to learn more.
Adjusted gross income (AGI) is your total gross income, reduced by certain adjustments such as IRA or HSA contributions, or the deduction for qualified student loan interest. Taxable income is adjusted gross income minus your deductions (standard or itemized).
There are two ways to claim deductions, which can reduce your taxable income and therefore the amount of tax you owe. You can either claim the standard deduction —an amount based on your filing status— or you can itemize your deductions. Also, keep in mind that under the TCJA, certain deductions have been repealed or changed from what they were in previous years. Take a look at standard vs. itemized deductions so you can figure out which is best for you.
A tax credit is a dollar for dollar reduction of income tax based on what you're eligible for. They're only awarded in special circumstances. Some credits are even refundable, meaning you'll get paid any amount of the credit that is more than your tax liability. Under the recent tax reform, some credits may have changed, such as the new child tax credit.
The Tax Cuts and Jobs Act was passed in 2017. This tax reform bill was the first major change to the United States tax code since 1986. Before filing your taxes, it’s important to see how the U.S. Tax Reform may affect your bracket, credits, deductions, and so on.
If you want an estimate of how U.S. tax law changes affect you, our tax estimator can help. By answering some simple questions, we can help you see what kind of refund you may receive, or if you may owe additional taxes. For more information or for filing assistance call or visit your local H&R Block tax office today.