Income Tax: How the System Fits Together
This site is a growing companion for a first undergraduate course in individual income taxation. It is not meant to catalog every tax rule. Its purpose is to help you build a durable map of the tax system so that individual rules have somewhere to fit.
The goal
Understand the structure. Understand what a tax rule actually does. Know when you need to look something up.
Start with the tax map
The individual income tax system is easier to learn when every new rule is connected to the overall calculation.
| All income | Start broadly with economic income. | |
|---|---|---|
| − | Exclusions | Specific rules remove some items from gross income. |
| = | Gross income | Income remaining after exclusions. |
| − | Deductions for AGI | Amounts that reduce income before AGI; the subtraction may occur on a source document, schedule, or Schedule 1. |
| = | Adjusted gross income (AGI) | A major checkpoint used throughout the tax law. |
| − | Deductions from AGI | Standard deduction or itemized deductions, plus other allowed deductions. |
| = | Taxable income | The amount to which income-tax rates are applied. |
| × | Tax rates / tax computation | Progressive brackets and other rate rules convert taxable income into tax. |
| = | Income tax before credits | Tax before credits and other taxes. |
| − | Nonrefundable credits | Credits that reduce tax but generally not below zero. |
| + | Other taxes | Examples can include self-employment tax and additional taxes. |
| = | Total tax | The taxpayer’s total federal tax liability before payments. |
| − | Payments & refundable credits | Withholding, estimated payments, and refundable credits. |
| = | Refund or amount owed | Compare total tax with payments and refundable amounts. |
How to use this site
- Start with a section overview before jumping into the individual rules underneath it.
- Keep returning to the tax map. Ask where each rule belongs and what number it changes.
- Work the examples and Now Try It questions instead of only reading them.
- Use the tax-year selector when annual limits or thresholds matter.
- Remember that tax law changes. Learning when you need more information is part of learning tax.
For your course and exams
Do not treat the pages currently posted here as a complete list of topics for your course or an exam. Use your course materials for the full scope of what you are responsible for knowing.
What’s available now
The site is being built in stages. The Contents menu shows the sections that are currently available.
The first completed section is Deductions for AGI: Adjustments on the Way to AGI. Its overview teaches the structure; the pages underneath it go deeper into educator expenses, retirement, health insurance and HSAs, student loan interest, and self-employed adjustments.
More sections will be added as they are completed.