How to Estimate Your Taxes
- 1). Estimate your taxable income for the year by adding the amount you expect to earn from taxable sources, such as jobs, interest income and investment income.
- 2). Subtract the value of your personal exemptions from taxable income. A personal exemption is a deduction you are allowed to claim for each person, including yourself, that you support. For example, the personal exemption value for the 2009 tax year is $3,650 so if you are married, file a joint return and have one kid, you would would be able to to claim three exemptions, which would decrease your taxable income by $10,950.
- 3). Subtract the value of any adjustments to income you will qualify for. Adjustments to income, also known as above-the-line deductions can be taken in addition to the standard deduction and include contributions made to a traditional IRA, student loan interest and educator expenses.
- 4). Subtract your standard deduction or the total of your itemized deductions, whichever you plan to claim come tax time, from your taxable income. Most people claim the standard deduction, but if you have excessive medical expenses, large charitable donations, significant mortgage interest or other interest income, you may choose to itemize. If so, estimate the value of your itemized deductions.
- 5). Calculate your estimated tax bill by using the federal income tax tables for your filing status and income level (See Resources). For example, if you were married filing jointly and have $40,000 of taxable income after exemptions and deductions, you would pay 10 percent on the first $16,750 and 15 percent on the remaining $23,250 for a total tax bill of $5,162.50.
- 6). Subtract the value of any tax credits that you are eligible to claim form your tax liability to you calculated in Step 5 to estimate your taxes. Tax credits directly reduce your taxes and include the retirement savings credit and the energy efficiency credit. For example, if you had a $200 energy efficiency tax credit and your tax bill from Step 5 was $5,162.50, you would estimate your taxes to be $4,962.50.
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