Taxable income is the number the IRS actually applies the tax rates to — and it is almost never your salary. Getting from gross pay to that figure takes three subtractions, and the difference is usually thousands of dollars of tax.
The taxable income formula
Taxable income = adjusted gross income (AGI) − deduction − qualified business income (QBI) deduction
In order:
- Adjusted gross income. Everything you earned — wages, business profit, interest, dividends — minus the “above-the-line” adjustments, such as the deductible half of self-employment tax, HSA contributions and traditional IRA contributions.
- The deduction. Subtract the larger of the standard deduction or your itemized deductions.
- The QBI deduction. If you have pass-through business income, up to 20% of qualified business income comes off too, subject to the limits on the IRS qualified business income page.
What is left is Form 1040 line 15, the base the brackets are applied to.
The 2026 numbers you subtract
| Filing status | Standard deduction (2026) |
|---|---|
| Single | $16,100 |
| Married filing jointly | $32,200 |
| Head of household | $24,150 |
| Married filing separately | $16,100 |
The amounts come from the 2026 inflation adjustments in IRS Rev. Proc. 2025-32 (§4.14). Itemizing — mortgage interest, state and local taxes up to the cap, charitable gifts, medical expenses above the threshold — only wins when those add up to more than the standard amount for your status, as IRS Tax Topic 501 explains.
Example: an $85,000 salary, single filer
- Gross wages and AGI: $85,000
- Standard deduction: −$16,100
- Taxable income: $68,900
Applying the 2026 brackets to $68,900: 10% on the first $12,400 = $1,240, 12% on the next $38,000 = $4,560, and 22% on the last $18,500 = $4,070. Federal income tax is $9,870.
That is 11.61% of the $85,000 — far below the 22% marginal rate, because only the income above $50,400 of taxable income is taxed at 22%. Your effective rate is always lower than your bracket. Run your own numbers through the income tax calculator.
Example: $60,000 of self-employment profit
Self-employed filers subtract one extra item before the standard deduction: half of the self-employment tax.
- Net profit: $60,000
- Net earnings for SE tax: $60,000 × 92.35% = $55,410
- SE tax: $55,410 × 15.3% = $8,477.73
- Deductible half: $4,238.87
- AGI: $60,000 − $4,238.87 = $55,761.13
- Standard deduction: −$16,100
- Taxable income: $39,661.13
- Income tax: 10% × $12,400 + 12% × $27,261.13 = $4,511.34
Two things worth noticing. The standard deduction does not reduce the self-employment tax itself, only income tax — the SE tax is computed on net earnings before any deduction. And the deductible half is an adjustment to income, so it lowers AGI before the standard deduction is even considered. The self-employment tax calculator separates both taxes, and the 1099 tax calculator covers 1099 income end to end.
Example: married filing jointly with $130,000
- AGI: $130,000
- Standard deduction: −$32,200
- Taxable income: $97,800
- Tax: 10% × $24,800 = $2,480 plus 12% × $73,000 = $8,760 → $11,240
The same $130,000 split the other way — a single filer — would land in the 24% bracket instead of the 12% bracket, which is why filing status is the first input in the income tax calculator.
Capital gains sit on top of taxable income
Long-term capital gains and qualified dividends use their own 0%/15%/20% rates, and they are stacked on top of ordinary taxable income rather than replacing it. For 2026, a single filer pays 0% on long-term gains that fall within the first $49,450 of taxable income, 15% up to $545,500, and 20% above that, per Rev. Proc. 2025-32 (§4.03).
A single filer with $30,000 of AGI and $40,000 of long-term gains:
- Ordinary taxable income: $30,000 − $16,100 = $13,900 → tax $1,420
- Long-term gains stacked on top: $49,450 − $13,900 = $35,550 still fits in the 0% bracket, so only the remaining $4,450 is taxed at 15% = $667.50
- Total on $53,900 of taxable income: $2,087.50
The gains did not lose their preferential rate because of the ordinary income underneath them — they simply filled the 0% space that was left. The capital gains tax calculator does that layering for you, and IRS Tax Topic 409 covers the rules.
Where taxable income meets your paycheck
Taxable income is an annual figure, but it is paid in 26 or 52 installments. The 2026 withholding tables in IRS Pub. 15-T embed the standard deduction, so for a single filer paid $1,500 a week the annualized $78,000 becomes $61,900 taxable, $8,330 of annual tax, and $160.19 withheld per week — plus $93.00 of Social Security and $21.75 of Medicare. The tax withholding calculator reconciles your paycheck with your actual liability, and if you have income with no withholding at all, the estimated tax calculator handles the quarterly payments.
The official 2026 brackets and deductions are in IRS Rev. Proc. 2025-32; the deduction rules are summarized in IRS Tax Topic 551 and Tax Topic 501.