Personal Income Taxes

US Personal Income Taxes (+ North Carolina)

Educational information, NOT tax advice. This is a practical filer’s reference, not a substitute for a CPA, enrolled agent, or tax attorney. Tax figures change every year with inflation, and the One Big Beautiful Bill Act (OBBBA, signed July 4, 2025) reshaped several individual provisions — so anything here is “as of 2026” and must be re-verified at irs.gov and ncdor.gov before you rely on it. Dollar thresholds below are date-stamped by tax year (TY): “TY2025” = the return filed in early 2026; “TY2026” = the return filed in early 2027.

This skill is a spoke of the consumer-finance hub (note only — do not modify the hub). In this installation the consumer-finance family is registered as consumer-credit-and-debt — route there for sibling topics. Neighboring spokes are cross-referenced at the end.

0. The shape of a 1040 (how the numbers connect)

A US individual return (Form 1040) flows top to bottom:

Gross income — wages (W-2 box 1), self-employment, interest, dividends, capital gains, retirement distributions, etc.
− Above-the-line adjustments (Schedule 1) → Adjusted Gross Income (AGI). AGI is the pivotal number; most phase-outs key off AGI or modified AGI (MAGI).
− Standard deduction OR itemized deductions (Schedule A) → taxable income.
Apply the tax brackets to taxable income → tax before credits.
− Tax credits (some refundable, some not) → tax after credits.
− Payments (withholding from W-2/1099, estimated payments) → refund or balance due.

TCJA note: Most of the 2017 Tax Cuts and Jobs Act individual structure was set to sunset after TY2025. OBBBA made the TCJA rate brackets and the larger standard deduction PERMANENT and added new (some temporary) deductions. The “2025→2026 sunset cliff” people feared did not happen — but several OBBBA add-ons (senior deduction, tips/overtime deductions) are temporary (≈TY2025–2028), so a different uncertainty now applies. Verify any OBBBA-specific figure at irs.gov.

1. Filing status

Status	Who	Notes
Single	Unmarried, not HoH	—
Married Filing Jointly (MFJ)	Married, one combined return	Usually lowest tax; both spouses jointly liable
Married Filing Separately (MFS)	Married, separate returns	Often higher tax; loses EITC, most education credits, blocks student-loan-interest deduction
Head of Household (HoH)	Unmarried + paid >½ cost of a home for a qualifying person	Bigger standard deduction & wider brackets than Single
Qualifying Surviving Spouse (QSS)	Widow(er) w/ dependent child, ≤2 yrs after spouse’s death	Uses MFJ brackets/standard deduction

Status is generally fixed by your situation on Dec 31.

2. Marginal vs effective brackets (date-stamped)

The US uses 7 marginal brackets (10/12/22/24/32/35/37%). Your marginal rate is the rate on your last dollar; your effective rate is total tax ÷ taxable income (always lower). A raise into a higher bracket only taxes the portion above the threshold — it never lowers your take-home.

Worked example (TY2025, Single, $60,000 taxable income): 10% on the first $11,925 + 12% from $11,925 to $48,475 + 22% on the last $11,525 = ≈$8,114 tax → marginal rate 22%, effective rate ≈13.5%.

TY2025 brackets (taxable income) — IRS Rev. Proc. 2024-40

Rate	Single	Married Filing Jointly
10%	$0 – $11,925	$0 – $23,850
12%	$11,926 – $48,475	$23,851 – $96,950
22%	$48,476 – $103,350	$96,951 – $206,700
24%	$103,351 – $197,300	$206,701 – $394,600
32%	$197,301 – $250,525	$394,601 – $501,050
35%	$250,526 – $626,350	$501,051 – $751,600
37%	over $626,350	over $751,600

TY2026 brackets (taxable income) — IRS Rev. Proc. 2025-32

Rate	Single	Married Filing Jointly
10%	$0 – $12,400	$0 – $24,800
12%	$12,401 – $50,400	$24,801 – $100,800
22%	$50,401 – $105,700	$100,801 – $211,400
24%	$105,701 – $201,775	$211,401 – $403,550
32%	$201,776 – $256,225	$403,551 – $512,450
35%	$256,226 – $640,600	$512,451 – $768,700
37%	over $640,600	over $768,700

(HoH, MFS, QSS thresholds differ — see the IRS releases linked below.)

3. Standard vs itemized deduction

Take the larger of the two. Most filers (since TCJA nearly doubled the standard deduction) take the standard.

Standard deduction

⚠️ OBBBA retroactively RAISED the TY2025 standard deduction above the originally-announced Oct-2024 figures. The numbers below are the in-effect, OBBBA-revised amounts (IRS Rev. Proc. 2025-32 supersedes the earlier figures). An old TY2025 source showing $15,000/$30,000 is pre-OBBBA.

Filing status	TY2025 (in effect)	TY2026
Single	$15,750	$16,100
Married Filing Jointly / QSS	$31,500	$32,200
Head of Household	$23,625	$24,150
Married Filing Separately	$15,750	$16,100

Additional standard deduction for age 65+ OR blind (per condition; a person 65+ and blind gets it twice): TY2025 $1,600 (married, per box) / $2,000 (unmarried); TY2026 $1,650 / $2,050.

Itemize instead if your total exceeds the standard deduction

Schedule A buckets: SALT (state/local income or sales + property tax — note OBBBA raised the SALT cap above the old $10,000; verify the current cap and income phasedown at irs.gov), mortgage interest, charitable gifts, medical expenses over 7.5% of AGI. Itemizing is common for homeowners in high-tax areas; renters rarely beat the standard deduction.

4. Common credits (more valuable than deductions — $-for-$)

A deduction lowers taxable income; a credit lowers tax dollar-for-dollar. Refundable credits can pay you beyond zero tax; nonrefundable only zero out tax owed. (Figures TY2025 unless noted.)

Credit	Form	Amount / structure	Key limits
Earned Income Tax Credit (EITC) — refundable	Sch. EIC	Max $649 (0 kids), $4,328 (1), $7,152 (2), $8,046 (3+)	Low/moderate earned income; investment income ≤ $11,950; MFS generally barred. Verify the AGI phase-out limits on the IRS EITC tables.
Child Tax Credit (CTC) — partly refundable	Sch. 8812	$2,200 / qualifying child (OBBBA raised from $2,000 & made permanent); refundable Additional CTC up to $1,700	MAGI phase-out $200k (Single/HoH) / $400k (MFJ); −$50 per $1,000 over. Child must have an SSN.
American Opportunity (AOTC) — 40% refundable	8863	$2,500/student = 100% of first $2,000 + 25% of next $2,000; up to $1,000 refundable	First 4 yrs of college; MAGI phase-out $80k–$90k Single / $160k–$180k MFJ (static)
Lifetime Learning (LLC) — nonrefundable	8863	$2,000/return (20% of up to $10,000)	Any post-secondary/job-skill course; same MAGI phase-out as AOTC. Can’t claim AOTC and LLC for the same student.
Saver’s Credit — nonrefundable	8880	50/20/10% of up to $2,000 contrib ($4,000 MFJ) → max $1,000/$2,000	TY2025 50% tier: AGI ≤ $23,750 Single / ≤ $47,500 MFJ. Becomes the “Saver’s Match” (a direct deposit) starting TY2027 (SECURE 2.0).
Child & Dependent Care — nonrefundable	2441	20–35% of up to $3,000 (1 dependent) / $6,000 (2+)	35% at AGI ≤ $15k, fading to 20% over $43k. OBBBA raises the top rate toward 50% beginning TY2026.

Don’t confuse the Child Tax Credit (per child, on Sch. 8812) with the Child & Dependent Care Credit (for daycare/care costs so you can work, on Form 2441) — they’re different credits and you can claim both.

5. Above-the-line adjustments (reduce AGI even if you take the standard deduction)

These come off gross income before AGI, so they help everyone and shrink MAGI-based phase-outs:

Adjustment	TY2025	TY2026	Notes
HSA contribution (must have an HDHP)	$4,300 self / $8,550 family	$4,400 / $8,750	+$1,000 catch-up at 55+. Triple-tax-advantaged.
Traditional IRA deduction	$7,000 (+$1,000 at 50+)	$7,500 (+$1,100)	Deduction phases out if you (or spouse) have a workplace plan — Single covered $79k–$89k (TY2025).
Student-loan interest	up to $2,500	up to $2,500	MAGI phase-out $85k–$100k Single / $170k–$200k MFJ; MFS can’t claim.

Retirement-account strategy and contribution mechanics (Roth vs traditional choice, backdoor Roth, employer-match optimization) are out of scope — route to a dedicated retirement/investing skill if one is installed. Briefly, on the tax side only: traditional = deduct now / taxed at withdrawal; Roth = no deduction now / tax-free qualified withdrawals. HSA and IRA appear here only as the AGI-reducing line items.

6. W-4 withholding & refund-vs-owe

Your employer withholds tax from each paycheck based on the Form W-4 you file.

The redesigned W-4 (post-2020) eliminated “allowances” (they were tied to personal exemptions, which TCJA zeroed out). It’s now a 5-step form: filing status (Step 1), multiple-jobs/working-spouse (Step 2), dependents/credits (Step 3), other income / deductions / extra withholding 4(c) (Step 4), sign (Step 5).
A big refund ≠ winning — it means you over-withheld and gave the government an interest-free loan all year. Owing a lot can trigger an underpayment penalty. The goal is to land near $0.
Tune withholding with the IRS Tax Withholding Estimator (irs.gov/individuals/tax-withholding-estimator), which outputs a pre-filled W-4.

7. W-2 vs 1099, self-employment tax & quarterly estimated taxes

Boundary: this section is for an individual filer with 1099 / gig / freelance income filing a personal return. If your question is about owner taxes because you formed an entity (LLC/S-corp/sole-prop entity choice and its self-employment-tax consequences), that’s venture-nc-business-formation-tax.

W-2 (employee): employer withholds income tax and pays half of your Social-Security/Medicare (FICA); you do nothing extra.

1099-NEC (independent contractor / gig / freelancer): no withholding, no employer FICA match — you owe self-employment tax and must make your own quarterly payments. (Worker status is decided by IRS common-law rules — behavioral/financial control & relationship; misclassification is a real risk.)

Self-employment (SE) tax

Rate 15.3% = 12.4% Social Security + 2.9% Medicare, charged on 92.35% of net SE earnings; kicks in at $400 of net earnings.
The 12.4% SS portion applies only up to the SS wage base: $176,100 (TY2025) / $184,500 (TY2026); the 2.9% Medicare portion has no cap.
0.9% Additional Medicare Tax on wages/SE income over $200k Single / $250k MFJ / $125k MFS (static — Form 8959).
You deduct one-half of SE tax above the line, easing the sting.

Quarterly estimated taxes (Form 1040-ES)

Who: anyone expecting to owe $1,000+ at filing after withholding (typical for self-employed, large investment income, or under-withheld W-2).
Safe harbor (avoids the underpayment penalty — pay the smaller of): 90% of this year’s tax, OR 100% of last year’s (110% if prior-year AGI > $150k).
Four due dates (TY2026 cycle): Apr 15 2026, Jun 15 2026, Sep 15 2026, Jan 15 2027 (next business day if a weekend/holiday). Penalty figured on Form 2210.

8. Capital gains (brief — tax treatment only; route strategy to a retirement/investing skill)

When you sell an asset (stock, crypto, property), gain = amount realized − basis. Basis = what you paid, adjusted for things like improvements or reinvested dividends.

Short-term (held ≤ 1 year): taxed as ordinary income at your bracket rate.
Long-term (held > 1 year): preferential 0% / 15% / 20% rates.

TY2025 long-term breakpoints (taxable income): 0% up to $48,350 Single / $96,700 MFJ; 15% above that to $533,400 / $600,050; 20% beyond.

Net Investment Income Tax (NIIT) 3.8% adds on top once MAGI exceeds $200k Single / $250k MFJ (static — Form 8960).
Reported on Schedule D + Form 8949. Capital losses offset gains and up to $3,000 of ordinary income per year (excess carries forward).

9. The IRS process: deadlines, extensions, fixes, audits, paying late

Topic	What to know
Deadline	April 15 (TY2025 → Apr 15, 2026); next business day if a weekend/holiday.
Extension (Form 4868)	Buys time to file (to Oct 15), NOT time to pay — estimate and pay by Apr 15 or owe interest + penalty.
Amended return (Form 1040-X)	Fix a filed return; e-fileable for the current + 2 prior years. Refund claim window: 3 years from the original filing (or 2 yrs after paying).
Audits	Correspondence (mail), office, or field. General 3-year assessment statute; up to 6 years for a substantial (>25%) income omission; no limit for fraud/non-filing. Keep records ≥3 yrs.
Payment plans	Short-term: ≤180 days, balance < $100k, $0 setup fee. Long-term installment agreement: balance ≤ $50k to apply online; small setup fee (reduced/waived for low income). Apply via the Online Payment Agreement.
Offer in Compromise (OIC)	Settle for less than you owe when you genuinely can’t pay it all; check the OIC Pre-Qualifier first. Not a routine discount — the IRS evaluates ability to pay.

A 1099-C (canceled debt) that shows up as taxable income — and the insolvency exclusion / Form 982 — is cross-referenced, not covered here → charge-offs-collections-and-debt-resolution. Likewise tax-related identity theft (someone files using your SSN), the IRS IP PIN, and Form 14039 → identity-theft-and-credit-fraud.

10. Free filing (verify current — status changed in 2025)

IRS Free File — public-private partnership: brand-name guided software free if AGI ≤ $89,000 (FS2026 figure; was ~$84k the prior year). Free File Fillable Forms are available at any income. Still operating. → irs.gov/freefile
IRS Direct File (the IRS’s own free direct-to-government e-file tool) —

⚠️ As of 2026: NOT available. The IRS told its 25 partner states in Nov 2025 that “Direct File will not be available in Filing Season 2026,” the app/pages are down (directfile.irs.gov refuses connection; the old IRS pages 404), and the Jan 2026 filing-season notice omits it. Note: OBBBA §70607 funded a study of a public-private replacement (a $15M task force, 90-day report) — it did not itself order termination; the shutdown was a separate IRS/Treasury administrative decision. Re-verify at irs.gov before relying — its future is unsettled.
Other free options: MilTax (military) and VITA/TCE (free in-person prep for lower-income, elderly, limited-English filers).

11. North Carolina individual income tax (flat rate)

NC is a flat-tax state — one rate on NC taxable income, no brackets. File Form D-400 (+ Schedule S for additions/deductions). NC deadline matches federal (≈April 15); NCDOR offers eFile.

NC flat rate (date-stamped) — NCDOR / G.S. 105-153.7

Tax year	Flat rate
2024	4.50%
2025	4.25%
2026 and after	3.99%

Beyond 2026, revenue-triggered cuts can step the rate down further (by up to 0.50 pt/yr) toward a statutory floor of 2.49%, but only if NC General-Fund revenue clears set thresholds (tax years 2027–2034) — conditional, not guaranteed. Verify at ncdor.gov.

NC standard deduction (TY2025)

Filing status	NC standard deduction
Married Filing Jointly / QSS	$25,500
Head of Household	$19,125
Single	$12,750
Married Filing Separately	$12,750

NC uses its own standard deduction, not the federal amount, and has no age-65/blind add-on. (TY2026 figure not separately published at research time — these have been flat since 2022; verify.)

Where NC differs from federal (filer-facing)

Starts from federal AGI, then applies NC adjustments → NC taxable income × flat rate. No personal exemptions.
Social Security / Railroad Retirement: NOT taxed by NC (deduct on D-400 Sch. S if in federal AGI).
Bailey settlement: certain federal/state/local & military retirement benefits are NC-exempt if the retiree had 5+ years of creditable service as of Aug 12, 1989.
Capital gains: taxed as ordinary income at the flat rate — NC has no preferential long-term rate (gains already sit in federal AGI).
NC itemized deductions are limited (mortgage interest + property taxes combined capped at $20,000; plus charitable, medical, claim-of-right) — narrower than federal Schedule A.
NC 529 contributions: no NC contribution deduction (earnings/qualified withdrawals are still NC-tax-free).

NC child deduction (a DEDUCTION, not a credit) — TY2025

Per qualifying child (one for whom you get the federal CTC), tiered by filing status and federal AGI; phases to $0 at higher AGI.

Filing status	Top tier (per child)	Fully phased out above
MFJ / QSS	$3,000 (AGI ≤ $40,000)	$140,000
Head of Household	$3,000 (AGI ≤ $30,000)	$105,000
Single / MFS	$3,000 (AGI ≤ $20,000)	$70,000

(Intermediate AGI tiers step down $500 at a time — see the NCDOR child-deduction page.)

NC BUSINESS taxes — entity income, sales/use, franchise, NC withholding, employer payroll — are out of scope here. Forming a NC entity / business tax → venture-nc-business-formation-tax; running payroll / NC withholding as an employer → venture-nc-employer-payroll.

Cross-references (consumer-finance family)

consumer-credit-and-debt — the installed consumer-finance family hub; route here for other consumer-finance/credit spokes.
charge-offs-collections-and-debt-resolution — 1099-C canceled-debt income, insolvency exclusion, Form 982.
identity-theft-and-credit-fraud — tax-related identity theft, IRS IP PIN, Form 14039, 5071C letter.
student-loans — student-loan repayment/forgiveness (the $2,500 interest deduction lives here in §5; the loans themselves are there).
personal-banking — deposit-interest (1099-INT) accounts, HYSA basics.
(retirement / investing skill, if installed) — retirement-account strategy (Roth vs traditional) and capital-gains strategy; this skill covers only the tax treatment of each.
venture-nc-business-formation-tax / venture-nc-employer-payroll — BUSINESS entity tax, sales/use/franchise, and employer payroll/withholding.

References (verify current — figures change yearly; re-check before relying)

Date-stamped: compiled 2026-06-16. Tax law is volatile post-OBBBA (July 2025).

Items to re-verify (were not lockable to a single primary HTML page at research time): OBBBA senior deduction ($6,000, TY2025–2028, MAGI phase-out), no-tax-on-tips / overtime deductions (caps & years), the new SALT cap amount and phasedown, and the $1,700 Additional CTC refundable cap — confirm each on irs.gov before relying. The NC TY2026 standard deduction and NC capital-gains treatment (inferred from the single-rate statute) likewise warrant a quick ncdor.gov check.