Tax Basics 101
BeginnerLearn fundamental tax concepts including income, deductions, and credits
Estimated Time: 20 minutes
Learning Objectives
- Understand what constitutes taxable income
- Learn about standard vs itemized deductions
- Understand tax credits vs tax deductions
- Calculate basic tax liability
Module Content
Taxable income is the portion of your income that's subject to federal income tax. It includes:
- Wages and salaries - Your regular pay from employment
- Business income - Profits from self-employment or business ownership
- Investment income - Dividends, interest, and capital gains
- Other income - Rental income, alimony, unemployment benefits
Big Beautiful Bill Impact: Under the new law, tip income and overtime pay are completely excluded from taxable income!
You can choose between taking the standard deduction or itemizing your deductions:
Standard Deduction
- Fixed amount based on filing status
- No receipts or documentation needed
- Enhanced under Big Beautiful Bill
- Additional amount for seniors (65+)
Itemized Deductions
- State and local taxes (SALT)
- Mortgage interest
- Charitable contributions
- Medical expenses
Understanding the difference between credits and deductions is crucial:
Tax Credits
Dollar-for-dollar reduction in taxes owed
$1,000 credit = $1,000 less tax
Tax Deductions
Reduce your taxable income
$1,000 deduction = $220-$370 less tax (depending on bracket)
Knowledge Check
Complete this quick quiz to test your understanding:
Module Navigation
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