How Adjustments, Deductions & Credits Work Together
The Tax Calculation Sequence
Tax benefits are applied in a logical order. Following the correct sequence ensures an accurate tax calculation.
- Start with gross income.
- Subtract eligible adjustments to determine AGI.
- Subtract either the standard deduction or itemized deductions.
- Calculate taxable income.
- Compute tax.
- Subtract eligible tax credits.
- Determine final tax owed or refund.
Summary
Each stage builds on the previous one, making the order of calculations very important.