Step 1: Determining Gross or Total Taxable income Gross Income - Sum of Taxable income from All Sources + Step 2: Calculating Adjusted Gross Income (AGI) Less: Adjustments to Gross Income: Tax-Deductible Expenses and Retirement Contributions (IRA, 401(k), 403(b) contributions, some moving expenses, etc.) Step 3: Subtracting Deductions Less: The Greater of Itemized Deductions or the Standard Deduction Step 4: Claiming Your Exemptions Less: Your Exemptions Step 5: Calculating Your Taxable Income and, from That, Calculating Your Base Income Tax Equals: Your Taxable Income; Then Use the Tax Tables or Tax Rate Schedules to Calculate Your Base Income Tax Step 6: Subtracting Your Credits and Determining Your Taxes Due Less: Any Tax Credits You Might Have to Determine Taxes Due + Equals: Taxes Due Question 4 - Which tax deduction (s) is targeted to encourage one to save for retirement? Question 5 Which tax deduction (s) is targeted to encourage home ownership? Question 6 Which tax deduction (s) is targeted to encourage higher education