At the end of calendar year 2025, nearly all provisions of the 2017 tax act that affect individual income taxes are scheduled to expire. Additionally, a deduction is available to owners of certain pass-through businesses, such as S corporations, partnerships, and sole proprietorships. The 2017 tax act (Public Law 115-97) temporarily changed the way taxable income is measured by suspending personal exemptions, increasing the value of the standard deduction, and changing limits on itemized deductions. Those deductions include personal exemptions (an amount taxpayers can claim on behalf of themselves, their spouses, and their dependents), and either the standard deduction, which is based on filing status, or itemized deductions, which are based on expenses or losses incurred. Taxable income is AGI minus allowable deductions. Under current law, no tax rate applies directly to total income or to AGI.Ī narrower measure of income-taxable income-is the measure of income that is subject to the individual income tax. AGI is typically the measure of income used in the tax code to phase out preferences for higher-income taxpayers. Those adjustments to income include a portion of the self-employment tax, certain contributions to retirement accounts, and interest on student loans. The next-broadest measure is AGI, which is total income minus certain deductions, called statutory adjustments. The broadest measure of income on an individual tax return is total income, which includes income from all sources not specifically excluded by the tax code. Broader measures of income allow for fewer deductions. Individuals are required to calculate three main measures of income on their tax return: total income, adjusted gross income (AGI), and taxable income. The tax code indicates both how to measure income subject to taxation and the tax rates that apply to that income. As specified in the tax code, an individual income tax is imposed on the wages, salaries, investments, and other forms of income that people earn.
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