TaxGhost

Engineering

Calculation methodology

Last updated 2026-07-18

These calculators estimate US federal income tax for tax year 2026. They are deterministic pure functions: the same inputs always produce the same outputs. Every number is traceable to an authority in the sources list, and every figure on the site shows the tax year and the date its rules were last updated.

Engine versioning

The calculation engine is versioned. You are reading output from engine 2026.2.2, last updated 2026-07-18. When the IRS releases inflation-adjusted parameters for a new tax year we ship a new minor version and update every stamped figure on the site. When we correct a formula we ship a new patch version and note it in the changelog below.

The year-end report (planned)

Because every projection is recorded with its inputs and sources, the connected monitor can grade itself. At year end it compares what it forecast against what you actually filed, line by line, and issues that comparison as the year-end report. The first reports arrive April 2027, covering tax year 2026. The artifact lives on the product page.

What the engine computes

  1. Federal ordinary income tax by applying the 2026 tax brackets to taxable income (adjusted gross income minus the standard deduction, including the additional deduction for age 65+ or blindness).
  2. Long-term capital gains under IRC §1(h), stacked on top of ordinary income, at 0%, 15%, or 20%.
  3. Net investment income tax (NIIT) of 3.8% under IRC §1411 on the lesser of net investment income or the excess of AGI over the threshold ($200,000 single, $250,000 married filing jointly).
  4. FICA payroll tax (Social Security 6.2% up to the wage base, Medicare 1.45% uncapped, plus the 0.9% additional Medicare above $200,000 single / $250,000 MFJ).
  5. Supplemental withholding at the flat federal rate (22% in 2026) for RSU and bonus income, with mandatory 37% on supplemental wages above $1 million.
  6. Underpayment penalty risk against the §6654 safe harbors: 90% of current-year tax, 100% of prior-year tax (110% if prior-year AGI exceeded $150,000).

What the engine does not compute

Being explicit about the boundary is more useful than pretending it isn't there. As of version2026.2.2, the engine does not compute:

  • State or local income tax. Every state with an income tax has its own brackets, deductions, and treatment of capital gains. Our federal figure is not your total bill.
  • The alternative minimum tax (AMT). AMT can apply on large incentive stock option exercises and certain high-income situations. If you exercised ISOs, treat the federal number here as a floor, not a ceiling.
  • Itemized deductions. We use the standard deduction. If you itemize — typically because of large SALT, mortgage interest, or charitable contributions — your taxable income is lower than we assume and so is your tax.
  • Qualified business income deduction (§199A), education credits, EV credits, and most other nonrefundable credits.
  • Net operating losses, capital loss carryforwards, and wash-sale adjustments.
  • The exact Form 2210 penalty. The IRS computes underpayment interest by quarter; we apply a single-period proxy at the 2026 federal underpayment rate. Your actual figure will differ — usually modestly.

Rounding

The IRS rounds to the whole dollar on Form 1040. We do the same: every figure is rounded to the nearest dollar after each computation, which can produce a $1 difference versus intermediate rounding in some edge cases.

Changelog

  • 2026.2.2 — 2026-08-02. RSU withholding now models the Pub 15-T two-tier rule: flat 22% on the first $1M of supplemental wages, mandatory 37% above. The RSU gap calculator previously over-withheld nothing above $1M, overstating the gap on seven-figure vest years.
  • 2026.2.1 — 2026-08-02. NIIT base floors at $0: net investment losses no longer produce a negative surtax. No published figure changes — the floor binds only on inputs no current calculator or guide scenario reaches.
  • 2026.2.0 — 2026-07-18. Initial 2026 parameter set: brackets, standard deduction, NIIT and FICA thresholds, supplemental withholding rate, §6654 safe-harbor percentages.

Sources

  1. IRS revenue procedure establishing 2026 inflation-adjusted brackets, standard deduction, and thresholds.
  2. IRC §1(h) — preferential rates for net capital gains and qualified dividends.
  3. IRC §1411 — net investment income tax.
  4. IRS Publication 15 (Circular E) and Publication 505 — FICA rates, wage base, supplemental withholding, and estimated-tax rules.

These calculators produce planning estimates, not tax advice. They are not a substitute for a return prepared by a qualified professional. See our full tax disclaimer and Circular 230 notice.