2.6.1. Federal tax calculation
All calculations for Sarah’s taxes should be entered in the Income and Taxes spreadsheet.
Assume that Sarah will save 5 percent of her gross salary in a qualified retirement plan. On Sarah’s
Summary Sheet, input Sarah’s salary (40,000) and retirement savings percent (5). The current personal
exemption and the current standard deduction for single filers are already included in the
worksheet.3 The amount remaining after the non-qualified savings, exemption and deduction are subtracted
is Sarah’s federal “taxable income” which is the amount shown in the box at the bottom of
the right-hand column of the worksheet. Click on the tab Federal Tax Calc and, following the example
described in Section 2.5, calculate Sarah’s federal income tax. Input the tax in the appropriate cell on
Sarah’s Summary Sheet.