IRS Publication 17, Your Federal Income Tax, is the Internal Revenue Service’s official plain-language guide for individuals preparing Form 1040. The IRS updates it every year, and the 2025 edition covers returns due by April 15, 2026.1Internal Revenue Service. Publication 17 (2025) – Your Federal Income Tax It walks you through the full calculation, from what counts as income to which credits cut your final bill, and reflects the IRS’s reading of federal tax law, Treasury regulations, and court decisions as they apply to individual filers. The 2025 edition also folds in changes made by the One Big Beautiful Bill Act, signed August 5, 2025, which adjusted the standard deduction, the SALT cap, the Child Tax Credit, and other provisions for 2026 and later years.
Filing Status and Dependents
Filing status is the first choice on the return, and it drives your brackets, your standard deduction, and eligibility for most credits. Publication 17 recognizes five: Single; Married Filing Jointly; Married Filing Separately; Head of Household; and Qualifying Surviving Spouse. Married Filing Jointly almost always produces the lowest combined tax for couples. Married Filing Separately usually costs more overall but can make sense when one spouse has large medical expenses or concerns about the other’s reporting. Head of Household is for unmarried filers who paid more than half the cost of keeping up a home where a qualifying person lived for more than half the year, and it comes with wider brackets and a larger standard deduction than Single. Qualifying Surviving Spouse is available for two years after a spouse’s death if you have a dependent child, and it uses the same brackets and standard deduction as Married Filing Jointly.
Dependents unlock the Child Tax Credit and Head of Household status. The IRS uses two tests. A qualifying child must be under 19 (or under 24 if a full-time student), must live with you more than half the year, and cannot have provided more than half of their own support.2Internal Revenue Service. Dependents A qualifying relative has no age or residency requirement but must have gross income below $5,300 for 2026, and you must provide more than half of that person’s total support.
What Counts as Gross Income
The calculation starts with gross income: everything you earned or received during the year that isn’t specifically exempt. Wages, salaries, tips, bonuses, commissions, and severance make up most of it for most people, and your employer reports them on Form W-2. Interest from bank accounts and bonds arrives on Form 1099-INT. Interest on state and municipal bonds is generally exempt from federal tax, though you still report it.
Dividends split into ordinary and qualified. Qualified dividends get the lower long-term capital gains rates rather than your ordinary rate, and your brokerage breaks out the two on Form 1099-DIV.3Internal Revenue Service. Topic No. 404, Dividends and Other Corporate Distributions
Selling an asset for more than you paid produces a capital gain. Assets held a year or less generate short-term gains taxed at ordinary rates; hold longer than a year and the gain qualifies for long-term rates of 0%, 15%, or 20% depending on taxable income.4Internal Revenue Service. Topic No. 409, Capital Gains and Losses For 2026, a single filer pays 0% on long-term gains up to $49,450 and doesn’t hit the 20% rate until taxable income exceeds $545,500. Joint filers reach 20% above $613,700.
Retirement distributions from pensions, annuities, and traditional IRAs are generally taxable, though the taxable share depends on whether you contributed pre-tax or after-tax dollars. Roth IRA distributions are tax-free if the account is at least five years old and you’re 59½ or older. Unemployment compensation is fully taxable and arrives on Form 1099-G.5Internal Revenue Service. Unemployment Compensation Prizes, awards, gambling winnings, and bartering income all count. Rental income goes on Schedule E, where you net it against allowable expenses.6Internal Revenue Service. Topic No. 414, Rental Income and Expenses
Adjustments That Get You to AGI
After totaling gross income, you subtract above-the-line adjustments to reach Adjusted Gross Income. AGI is the number that controls eligibility for dozens of downstream credits and deductions, so these adjustments work twice: they lower income directly and can also keep you under phase-out thresholds.
Eligible K–12 teachers can deduct up to $300 in unreimbursed classroom expenses, and each spouse can claim the $300 on a joint return if both qualify.7Internal Revenue Service. Topic No. 458, Educator Expense Deduction Contributions to a Health Savings Account are deductible if you have a qualifying high-deductible health plan. The 2026 limits are $4,400 for self-only coverage and $8,750 for family coverage, with an extra $1,000 catch-up allowed at age 55 or older.8Internal Revenue Service. Rev. Proc. 2025-19
Self-employed filers can deduct half of their self-employment tax, which mirrors the employer share of Social Security and Medicare taxes.9Internal Revenue Service. Topic No. 554, Self-Employment Tax They can also deduct health insurance premiums paid for themselves, a spouse, and dependents, provided they aren’t eligible for coverage through an employer plan.
The student loan interest deduction covers up to $2,500 of interest on qualified education loans. For 2026, it phases out between $85,000 and $100,000 of modified AGI for single filers, and between $175,000 and $205,000 for joint filers. Early-withdrawal penalties charged by a bank on a CD are also deductible.
Standard Deduction and Itemizing
Once you have AGI, you choose between the standard deduction and itemizing on Schedule A. The larger of the two wins, and most filers do better with the standard deduction.
For tax year 2026, the standard deduction is $16,100 for Single and Married Filing Separately, $32,200 for Married Filing Jointly and Qualifying Surviving Spouse, and $24,150 for Head of Household.10Internal Revenue Service. Rev. Proc. 2025-32 If you’re 65 or older, or legally blind, you get an additional standard deduction: $1,650 per qualifying condition if you’re married, $2,050 if you’re unmarried. Someone who is both 65 and blind gets the amount twice.
Itemize only when your allowable expenses beat the standard deduction.11Internal Revenue Service. Topic No. 501, Should I Itemize? The main categories:
Medical and dental expenses. Unreimbursed costs are deductible only to the extent they exceed 7.5% of AGI. On $80,000 of AGI with $10,000 of qualifying expenses, $4,000 is deductible.12Internal Revenue Service. Topic No. 502, Medical and Dental Expenses
State and local taxes. You can deduct state and local income taxes (or sales taxes, but not both) plus property taxes. The One Big Beautiful Bill Act raised the SALT cap. For 2026 the maximum is $40,400 ($20,200 for Married Filing Separately). The cap phases down for modified AGI above $505,000 ($252,500 MFS) but never drops below $10,000 ($5,000 MFS).13Internal Revenue Service. Topic No. 503, Deductible Taxes
Mortgage interest. Interest on debt used to buy, build, or substantially improve your main home or a second home is deductible on up to $750,000 of acquisition debt ($375,000 MFS). Mortgages taken out before December 16, 2017 keep the older $1,000,000 limit.14Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction Home equity loan interest is deductible only if the funds were used to improve the home securing the loan.
Charitable contributions. Cash gifts to qualified charities are generally deductible up to 60% of AGI; gifts of appreciated property such as stock are capped at 30%. Cash contributions above $250 need a written acknowledgment from the charity, and property gifts above $5,000 generally require a qualified appraisal.
2026 Federal Income Tax Brackets
Publication 17 explains the federal income tax as a progressive system with seven brackets: only the income that falls inside a bracket’s range is taxed at that bracket’s rate. The 2026 brackets:15Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Single: 10% up to $12,400; 12% to $50,400; 22% to $105,700; 24% to $201,775; 32% to $256,225; 35% to $640,600; 37% above $640,600.
Married Filing Jointly: 10% up to $24,800; 12% to $100,800; 22% to $211,400; 24% to $403,550; 32% to $512,450; 35% to $768,700; 37% above $768,700.
Head of Household: 10% up to $17,700; 12% to $67,450; 22% to $105,700; 24% to $201,750; 32% to $256,200; 35% to $640,600; 37% above $640,600.
Landing in the 22% bracket does not mean your whole income is taxed at 22%. A single filer with $60,000 in taxable income pays 22% only on the $9,600 above $50,400. The rest is taxed at 10% and 12%.
Credits That Cut Your Tax Directly
Credits reduce your actual tax bill dollar for dollar. A $1,000 credit saves $1,000. A $1,000 deduction, by contrast, saves $220 to $370 depending on your bracket.
Child Tax Credit
Up to $2,200 per qualifying child under 17.16Internal Revenue Service. Child Tax Credit The credit phases out starting at $200,000 of modified AGI ($400,000 for joint filers). Up to $1,700 per child is refundable through the Additional Child Tax Credit, so you can receive money back even if you owe no tax.
Earned Income Tax Credit
The EITC is a fully refundable credit for low-to-moderate-income workers. The amount depends on earned income, filing status, and number of qualifying children. Workers with three or more children receive the largest credit, and a smaller version is available to workers with no children. Amounts and income limits adjust annually for inflation.
Education Credits
The American Opportunity Tax Credit gives up to $2,500 per eligible student during the first four years of college, with 40% (up to $1,000) refundable. It phases out between $80,000 and $90,000 of modified AGI for single filers, and between $160,000 and $180,000 for joint filers.17Internal Revenue Service. American Opportunity Tax Credit The Lifetime Learning Credit covers up to $2,000 per return (20% of the first $10,000 in qualified expenses), applies beyond the first four years, and covers degree programs, certificates, and job-skills courses. It is not refundable, and you cannot claim both credits for the same student in the same year.
Child and Dependent Care Credit
If you paid for the care of a dependent under 13, or a spouse or dependent unable to care for themselves, so that you could work or look for work, you may qualify.18Internal Revenue Service. Topic No. 602, Child and Dependent Care Credit The credit is 20% to 35% of up to $3,000 in expenses for one qualifying individual, or $6,000 for two or more, with the percentage depending on AGI.
The Digital Asset Question
Form 1040 now includes a yes-or-no question about digital asset activity that every filer must answer. Check “yes” if during the year you received digital assets as payment; sold or exchanged cryptocurrency; swapped one digital asset for another; used crypto to pay for goods or services; gifted or donated digital assets; or disposed of shares in an exchange-traded fund that held digital assets.19Internal Revenue Service. Determine How to Answer the Digital Asset Question
The IRS treats digital assets as property, so the capital gains rules apply. Sell within a year and the gain is ordinary income; hold longer than a year and it qualifies for long-term rates.20Internal Revenue Service. Frequently Asked Questions on Virtual Currency Transactions Buying cryptocurrency with U.S. dollars and simply holding it is not a taxable event and does not require a “yes.”
Deadlines, Extensions, and Late Penalties
Form 1040 and any tax owed are due April 15. For the 2025 tax year, that means April 15, 2026.21Internal Revenue Service. Publication 17 – Your Federal Income Tax Filing Form 4868 gives you an automatic six-month extension to October 15. You can also get the extension by making an electronic payment and selecting “Form 4868” as the payment type, without separately filing the form.
An extension to file is not an extension to pay.22Internal Revenue Service. Taxpayers Should Know That an Extension to File Is Not an Extension to Pay Taxes Whatever you owe is still due April 15. If you expect to owe, estimate the amount and send it with your extension request; otherwise interest and penalties start running the next day.
The failure-to-file penalty is 5% of unpaid tax per month or partial month, capped at 25%. If your return is more than 60 days late, the minimum penalty is the lesser of $525 or 100% of the tax owed.23Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges The failure-to-pay penalty is 0.5% per month, also capped at 25%. When both apply in the same month, the filing penalty drops to 4.5% so the combined hit stays at 5%.
The practical point: if you can’t pay in full, file on time anyway. The filing penalty runs ten times faster than the payment penalty, and filing on time plus setting up an IRS payment plan will always cost less than skipping the deadline.
How Publication 17 Fits With the Rest of the IRS Guides
Publication 17 is a starting point, not the finish line. It covers the most common individual situations in roughly 100 pages, and where a topic gets specialized the guide points you to a narrower publication: rental property in Publication 527, investment income in Publication 550, home mortgage interest in Publication 936, and so on. The current edition is free at irs.gov as both a web page and a downloadable PDF.1Internal Revenue Service. Publication 17 (2025) – Your Federal Income Tax