Tax Report: Key Figures - Total Income, AGI, Deductions, Taxable Income and Total Tax

The top of box of the Tax Report contains the Key Figures derived from the tax return.

In this article, we will be reviewing the left-hand column of the "Key Figures" box, and includes the Total Income, AGI, Deductions, Taxable Income, and Total Tax key figures.

Click here to review the article discussing Filing Status, Marginal Rate, Average Rate/Effective Rate, Safe Harbor, and Tax Exempt Percentage of Income (if applicable) key figures.
Click here to review the article discussing Tax Exempt Interest, Qualified/Ordinary Dividends, ST/LT Capital Gains, Carryforward Loss, and Credits claimed key figures.

• Total income (Form 1040, Line 9) = income from all sources, regardless of type. In this case, between wages, interest, dividends, IRA distributions, capital gains, and self-employment income, the total income amounted to $234,650. 
• Schedule 1 Adjustments (Form 1040, Line 10) = “above the line” deductions (aka deductions for AGI). Specific to this return, Paula can deduct half of her self-employment tax ($3,738) in Schedule 1 adjustments to income. Other common adjustments on Schedule 1 include the health savings account (HSA) deduction; self-employed health insurance deduction; contributions to SEP, SIMPLE and qualified plans; deductible IRA contributions, student loan interest deductions, and educator expenses, among others.
• Adjusted Gross Income (AGI), Form 1040, Line 11) = Total income after the adjustments from Part II of Schedule 1. In this case, after Schedule 1 adjustments of $3,738, Peter and Paula's AGI was $230,912.
• Standard Deduction or Itemized Deductions (Form 1040, Line 12) = either the standard deduction allowable to all taxpayers or the amount of itemized deductions, whichever is higher.
  
  • The standard deduction is determined by filing status; in 2023, the standard deduction for married filing jointly (MFJ) taxpayers was $27,700, as seen in the descriptive box to the left of Line 12 on the 1040. Individuals over age 65 and/or who are blind can add additional deductions to the standard deduction, and elect those additional deductions by checking the boxes directly above where the dependents are listed on the return.
  • Itemized deductions most commonly include:
    • • Medical expenses above 7.5% of AGI, 
      • State and local taxes (income, property, real estate, etc.), capped at $10,000
      • Mortgage interest
      • Charitable contributions 
    • Less commonly, taxpayers can also deduct investment interest expenses (in certain cases), casualty and theft losses, and income in respect of a decedent (resulting from estate tax paid that was attributable to assets in qualified retirement accounts inherited by the taxpayer). 
    • Itemized deductions are captured on Schedule A.
  • Because Peter and Paula's itemized deductions of $42,000 exceed the standard deduction amount, they took the itemized deduction in 2023.
• Taxable Income (Form 1040, Line 15) = Adjusted Gross Income less deductions from AGI. This is the amount that is used to calculate the actual tax bill.
  • For many taxpayers, deductions will equal the applicable standard deduction or the total itemized deductions. 
  • Taxpayers with self-employment and/or real estate income may also be eligible for the Qualified Business Income (QBI) deduction (Form 1040, Line 13). (Note: Holistiplan does not include the QBI Deduction (QBID) on the Key Figures box.)
  • Paula was eligible for and took a QBI deduction of $9,832
  • After the itemized deductions and the QBI deduction, Michael and Melissa’s taxable income was $179,080.
• Total tax (Form 1040, Line 24) = the amount of tax resulting from the taxes on ordinary income (taxable income less the qualified income eligible for the preferential long-term capital gains tax rates using the progressive marginal bracket system), qualified dividends/capital gains income (using those more preferential tax rates) and additional taxes from Schedule 2 (Self-Employment Tax), less the child tax credit and other non-refundable credits from Schedule 3.

• • Peter and Paula’s tax on ordinary income (at the marginal rates) and qualified dividends/capital gains income (at the long-term capital gains rates) amounted to $27,458 (Form 1040, Line 16).
  • Peter and Paula's "Other Taxes" (Form 1040, Line 23) totaled $7,475 which was entirely attributable to Self-Employment Tax. For some taxpayers, these "Other Taxes" may include Additional Medicare Tax and/or Net Investment Income (NIIT) Tax, among others. Taxpayers with wages and/or modified adjusted gross income over $200,000/$250,000 (single/married filing joint) have an additional 0.9% Medicare tax on wages and may have a 3.8% Net Investment Income Tax that are included as part of the total tax calculation.
  • Peter and Paula had one child over 17 (Lisa) who qualified for a $500 Other Dependent Credit (ODC). They also had a child under 17 (Bart) who qualified for the $2,000 child tax credit. Peter and Paula qualified for the full amount of the credit, but some taxpayers will have this credit amount limited due to their income. These two credits totaling $2,500 are calculated on Schedule 8812 and reported on Line 19 of Form 1040.

• • Peter and Paula had dependent care expenses for Bart, resulting in a $1,200 credit for child and dependent care expenses (Schedule 3, Line 2). They also had a $6,000 residential energy credit (Schedule 3, Line 5a). The $7,200 total of these two credits is reported on Form 1040, Line 20. Both of these credits are non-refundable, meaning they can take a taxpayer's tax obligation down to $0, but no lower than that (which would result in a refund).
  • Peter and Paula's total tax credits (child tax credit, dependent care expense credit, and residential energy credit) of $9,700 were reported on Form 1040, Line 21.

• • The net result was total tax of $25,233 as reported on Form 1040, Line 24.