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Income taxes

Make tax time less taxing: Learn how the income tax system works, what goes into calculating your taxes, and how you can plan to minimize your tax liability.

Intro to income tax

How is your income tax determined?

Computing your income tax is a multi-step process. Here is a general overview of the steps.

  • Step 1: Subtract above-the-line-deductions from your total income to determine your adjusted gross income.
  • Step 2: Subtract below-the-line-deductions from your adjusted gross income to determine your taxable income.
  • Step 3: Your taxable income is used to calculate your federal income tax.


Definitions of terms


  • Total income: includes salary, other income, interest, dividends, capital gains, retirement plan distributions.
  • Above-the-line-deductions: include certain retirement contributions and health insurance deductions.
  • Adjusted gross income (AGI): Determines how your income is taxed and your benefits from certain itemized deductions.
  • Below-the-line-deductions: Standard or itemized deductions (e.g., medical expenses, mortgage and investment interest expenses).


Things to consider


You can’t avoid paying taxes, but you can better understand them – and minimize their impact where you can.


  • Determine your total income and how to reduce your taxes on that income. (For example, contribute as much as possible to an employer-sponsored retirement plan.)
  • Work with your tax advisor to understand whether you are required to pay estimated tax payments quarterly.
  • If you receive a large refund, adjust your withholding or estimated tax payments so you have more money in an account earning interest.
  • If you are going to take out a large loan, or make a big investment, discuss the tax and cash flow implications with your financial team and tax advisors.

Tax terms

Itemized deductions

You may be able to deduct all or a portion of certain expenses if you itemize your deductions. These include: medical expenses, state income tax and real estate taxes, mortgage and investment interest expenses, charitable donations and investment expenses.


Credits reduce your actual tax liability. For instance, if you paid $100 in foreign taxes on investment income, you may be able to claim a $100 credit on your tax return, reducing your total liability by the amount of the credit.

Standard deduction

ou are allowed a simplified deduction, called the "standard deduction" if you do not itemize your deductions. For 2024, the standard deduction is $14,600 for single taxpayers and $29,200 for married taxpayers filing jointly.

Alternative minimum tax

The alternative minimum tax ensures that taxpayers pay a minimum in taxes each year. All taxpayers have to calculate their tax liability twice — the standard way and again for the alternative minimum tax. The taxpayer then pays the higher liability amount of the two.

Should you itemize deductions?

Generally, you’ll want to itemize if it will allow you to deduct more expenses than the standard deduction — which is a fixed amount generally based on your filing status. 

Tax FAQs

Do I pay income tax on everything I receive?

Will all of my income be taxed at the same rate?

What’s included in itemized deductions?

Can I pay all of my taxes on April 15?

When will I get my refund?

How long should I keep my tax returns?

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