d. Adjustments
Studen loan interests and IRA contributions are deductions found under the heading of ADJUSTMENTS TO INCOME to compute for the Adjusted Gross Income or AGI.
Standard deductions are those based on the filing status of the individual and not his total itemized deductions. Regardless of the actual expenses incurred by an individual, he can claim a standar deduction if he is single, head of household, married filing separately, married filing jointly, qualifying widow(er). at the time he files for his federal tax return.
taxable income is the income left from all the necessary deductions.
For example: Gretchen's income => $56,750
less: Adjustments to income
student loan interest $1,200
IRA Contribution 3,000 - 4,200
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Taxable income $52,550
