Finance Maxxing
Income Tax Basics
Taxable Income
Income remaining after deductions, subject to tax.
Taxable income is the amount that actually flows into the bracket calculation:
Gross Income
− Above-the-line deductions (401k, IRA, HSA, etc.)
= Adjusted Gross Income (AGI)
− Standard Deduction OR Itemized Deductions
= Taxable Income
Key Reductions
| Deduction | Type | 2025 Limit |
|---|---|---|
| Traditional 401(k) | Above-the-line | $23,500 |
| Traditional IRA | Above-the-line | $7,000 |
| HSA | Above-the-line | $4,300 / $8,550 |
| Student Loan Interest | Above-the-line | $2,500 |
| Standard Deduction (Single) | Below-the-line | ~$15,000 |
| Standard Deduction (MFJ) | Below-the-line | ~$30,000 |
Every dollar that reduces your taxable income saves you taxes at your marginal rate.
Sources
More in Income Tax Basics
Tax Brackets
Progressive rate tiers applied to taxable income.
Marginal Tax Rate
The tax rate on your next dollar of income.
Effective Tax Rate
Your average tax rate across all income.
Adjusted Gross Income (AGI)
Gross income minus above-the-line deductions.
Modified Adjusted Gross Income (MAGI)
AGI with certain deductions added back, used for eligibility tests.
Filing Status
Determines your bracket thresholds and standard deduction.
Marriage Penalty & Bonus
Tax impact of filing jointly vs. two singles.
Tax Cuts and Jobs Act (TCJA)
2017 law that lowered rates and doubled the standard deduction.