How to Calculate Federal & State Taxes

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If you live in the United States and make the minimum needed to file taxes, you have to file a tax return. Most states also have an income tax. Before you can calculate your taxes you must determine your filing status based on whether you are married or have dependents. If neither applies, you would file as single. If you are single but have dependents you may be eligible to file as a head of household. If you are married, you have the option to file a joint return with your spouse or use the married filing separately status and file two separate returns. Your filing status will determine your standard deduction and your tax brackets.

Determine your total taxable income for the year. For federal taxes, this includes all of your wages, bonuses, interest income and dividends made during the year. Each of your employers should send you a W-2 form, which will show you exactly how much taxable income you earned with them. Financial institutions that you have earned interest or dividends with will send you a 1099 form that shows your taxable income. For most states, you also have to pay taxes on your income.

Determine the deductions you are eligible to take. The standard deduction can be claimed by all tax payers unless you chose to itemize your deductions. Though the amount differs, there is a standard deduction for both federal and most state taxes. On your federal taxes, there are above-the-line deductions that you can take in addition to the standard deduction including student loan interest, contributions to traditional IRAs, moving expenses and certain higher educational expenses. Itemized deductions include mortgage interest, charitable donations and certain medical expenses. Most states use similar above-the-line and itemized deductions as the federal taxes.

Subtract your deductions from your taxable income. This is your adjusted gross income, or the amount that taxes are calculated from. For example, if you have $50,000 in taxable income and $10,000 in deductions, your adjusted gross income would be $40,000. Repeat this step for federal and state taxes.

Determine the amount of taxes you would owe for the year by using the tax brackets for your filing status. There are different tax brackets for federal taxes and the taxes of each state. For example for 2012 federal taxes, if you were single and had an adjusted gross income of $40,000, you would determine the amount of tax you owe by multiplying the first $8,700 by 10 percent, the next $26,650 by 15 percent and the last $4,650 by 25 percent to get a total tax bill of $6,030.

Determine how much you have had withheld for income taxes. On your W-2 forms, box two shows the amount that was withheld for federal taxes and box 17 shows the amount withheld for state income taxes. Do this step for federal and state taxes.

Subtract the amount of withholding from the amount of tax you owe. If the number is positive, that is the amount that you owe in taxes. If it is negative, that is the amount of money you will get as a refund. For example, if your tax bill was $6,000 and you had $7,000 withheld, you would get negative $1,000 meaning you were owed a $1,000 refund. Repeat this step for both federal and state taxes. It is possible to get a refund on one tax return and owe money on the other.


  • The states that do not have any income tax are Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming. New Hampshire and Tennessee have only dividend and interest taxes.


  • If you itemize your deductions you are ineligible to take the standard deduction and must use a Form 1040 for your federal taxes.