CRS Report – Federal Individual Income Tax Terms: An Explanation, Updated February 4, 2021: “This report describes the terms most commonly used when discussing the federal individual income tax. Most of these tax terms are explained in the order that they occur in the process of determining one’s income tax on the Form 1040. Total income is the sum total of all income required to be reported for tax purposes….Adjusted gross income (AGI)  equals gross income less above-the-line deductions (i.e., qualifying adjustments to income). It is the income measurement before a taxpayer claims either the standard deduction or the sum of all their itemized deductions (whichever is greater). Itemized deductions are subtracted from AGI and are allowed for certain types of expenditures for which income taxation is deemed inappropriate or inadvisable. The standard deduction, by contrast, is a set amount that varies by filing status and may be subtracted from AGI if it is greater than a taxpayer’s itemized deductions. An additional standard deduction amount is available to certain individuals, for example the blind or elderly. Deductions function like adjustments and exclusions in their effect on tax liability. Taxable income is adjusted gross income reduced by either the standard deduction (plus the additional standard deduction in some cases) or itemized deductions along witha deduction for qualified pass-through business income, when applicable. Taxable income is the base to which the income tax rates are applied to calculate income tax liability. Tax liability is calculated by applying the marginal tax rate and schedule to taxable income.Tax creditsare then subtracted from gross tax liability to arrive at a taxpayer’s final tax liability….”