Taxable Income

REG loves a multi-step computation that hands you raw figures and forces you to assemble them in the right order: gross income minus above-the-line (for-AGI) deductions = AGI, then AGI minus the greater of the standard or itemized deductions, minus the QBI deduction = taxable income. (“Above-the-line,” “for-AGI,” and “adjustments to income” all name the same set.) The “tell” is a question giving you wages, interest, IRA contributions, and itemized data together; the answer hinges on slotting each item above or below the AGI line, because placement controls AGI-driven floors and phaseouts.

The classic trap is stopping one line too early or too late: candidates confuse AGI (a subtotal, before the standard/itemized choice and QBI) with taxable income, or subtract tax credits here. Remember that credits attack the tax, not the base — they come after rates are applied, never reducing taxable income itself. The QBI deduction — a 20% pass-through deduction OBBBA made permanent (it had been scheduled to expire after 2025) — is also frequently missed because it reduces taxable income yet is not an itemized deduction. Hook: G-A-T (Gross → AGI → Taxable) walks you down the return in order.