Gross income is the total of all income earned in a calendar year whether it be taxable or nontaxable. Once the nontaxable has been isolated, you'll note that on the first page of the federal form 1040 there is a section at the bottom for adjustments to gross income. When this is completed, the final line is adjusted gross income which then leads you to page 2. Here, you make a decision as to your filing status and the number of exemptions you're entitled to. Then, you either itemized deductions or take a standard deduction. When this is complete, all of these deductions reduce your adjusted gross income as defined above and this becomes your taxable income for the current year. If you get your hands on the first two pages of the federal form 1040, I think you'll find this to be very helpful. I hope this helps and good luck
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