How federal income tax is estimated
The calculator first builds gross income from the listed categories, subtracts entered adjustments and deductions, then separates taxable income into ordinary and preferential portions. Ordinary income uses the progressive 2026 statutory schedule.
Tax on qualified dividends and eligible long-term gains is added using the 0%, 15%, and 20% ranges. The lower regular-tax comparison is used where required, and known nonrefundable credits are applied last.
Gross income, adjusted gross income, and taxable income
Gross income is the total of wages, taxable interest, ordinary dividends, short- and long-term gains, and other taxable ordinary income entered here. Pre-tax adjustments reduce that amount to adjusted gross income, or AGI, but not below zero.
The chosen standard or custom deduction and Other deductions then reduce AGI to taxable income. A deduction reduces income subject to tax; it does not directly subtract dollar for dollar from tax.
Ordinary income vs. preferentially taxed income
Wages, interest, nonqualified dividends, short-term gains, and other ordinary amounts use the regular brackets. Short-term capital gains are taxed as ordinary income in this estimate.
Qualified dividends and eligible net long-term capital gains may use 0%, 15%, or 20% rates. They stack on top of ordinary taxable income, which uses available threshold room first. A 0% capital-gains rate therefore does not mean all income is tax-free.
How qualified dividends are entered
Qualified dividends are already included in the ordinary-dividends total on a tax statement. Enter that total in Ordinary dividends, then enter only the qualified portion in Qualified dividends included above.
The calculator uses the qualified amount to classify part of taxable income for preferential rates; it never adds that amount to gross income a second time.
How deductions affect taxable income
The standard method includes the 2026 basic deduction plus the applicable per-condition addition for age 65 or older and blindness. Joint filers may have conditions for both spouses. These additions are not applied with a custom deduction.
Other deductions accepts an amount already calculated separately, including an eligible enhanced senior deduction when appropriate. TaxArith does not determine eligibility or phase-outs, and deductions can reduce taxable income only to zero.
How nonrefundable tax credits work
A tax credit reduces calculated income tax rather than taxable income. The entered nonrefundable amount is used only up to tax before credits, so the estimate cannot become negative.
Any unused amount is shown separately for explanation and is not a refund. The calculator does not determine eligibility for the Child Tax Credit, education credits, dependent credits, or any refundable portion.
What this calculator does not include
This estimate excludes state and local income tax, Social Security and Medicare taxes, self-employment tax, withholding, refunds, AMT, NIIT, QBI, collectibles and Section 1250 rules, loss carryovers, wash sales, kiddie tax, and many return-specific provisions.
Income after estimated federal tax is not take-home pay because payroll, state, local, and other taxes are not subtracted. An actual return can differ because of omitted facts, special rules, tax-table use, or rounding.