Explained
The code, in plain English
Explainers sit next to the official text. Each says what the section does, who it touches and what it means in dollars for 2026. They're written to inform, not to argue, and every one links to its sources.
§ 6012Do I have to file a tax return?You must file a federal return if your gross income reaches your standard deduction ($16,100 single, $32,200 joint for 2026), if you net $400 from self-employment, and in several other cases, even when you owe nothing.§ 6038AForm 5472 — the $25,000 trap for foreign-owned LLCsA US single-member LLC owned by a foreigner must file Form 5472 every year it has transactions with its owner — even if it owes no tax. Missing it costs $25,000.§ 1The income tax ratesSeven rates from 10% to 37%, applied in layers. Only the slice of income inside each bracket is taxed at that bracket's rate.§ 63Taxable income and the standard deductionTaxable income is what's left after deductions. Most people take the flat standard deduction — $16,100 single, $32,200 married filing jointly for 2026.§ 1401Self-employment taxFreelancers pay both halves of Social Security and Medicare: 15.3% on about 92% of net profit, starting at just $400 of earnings.§ 224“No tax on tips” — the qualified tips deductionFrom 2025 to 2028, tipped workers can deduct up to $25,000 of tips from federal income tax. Payroll taxes and most state taxes still apply.§ 7701Who counts as a US tax residentTax residency isn't immigration status. A green card or the “substantial presence test” — a day-counting formula — makes you a resident, taxed on worldwide income.§ 24The child tax creditUp to $2,200 per child under 17, with up to $1,700 of it paid out even if you owe no tax. Social Security numbers are required.§ 121Selling your home: the $250,000 / $500,000 exclusionLive in your home 2 of the last 5 years and up to $250,000 of profit ($500,000 for couples) is tax-free. The limits haven't changed since 1997.§ 199AThe qualified business income (QBI) deductionOwners of pass-through businesses can deduct up to 20% of their business profit, capped at 20% of taxable income. Made permanent in 2025.§ 32The earned income tax credit (EITC)A refundable credit for working people with low to moderate earnings — up to $8,231 for 2026 with three or more children, $664 with none.§ 871How nonresidents are taxedNonresident aliens pay a flat 30% on US passive income like dividends — often cut by treaty — and normal rates on income tied to a US business.§ 225The overtime deductionFrom 2025 to 2028, hourly workers can deduct the “half” in time-and-a-half — up to $12,500, or $25,000 for couples.§ 61What counts as incomeIncome is “all income from whatever source derived” — wages, side gigs, tips, barter, crypto, prizes — unless another section specifically excludes it.§ 162Business expenses you can deductAny “ordinary and necessary” cost of running your business is deductible — software, equipment, travel, a share of your phone. Personal costs, and most entertainment, are not.§ 6654Quarterly estimated tax, and how to avoid the penaltyIf tax isn't withheld from your income, the IRS expects it in four payments during the year. Pay 100% of last year's tax (110% above $150,000 AGI) and there's no penalty.§ 911Americans abroad: the foreign earned income exclusionUS citizens and green-card holders living abroad still file US returns, but can exclude up to $132,900 of foreign wages or self-employment income for 2026.§ 86When Social Security benefits are taxedBetween 0% and 85% of Social Security benefits are taxable, depending on “combined income” — and the $25,000 / $32,000 thresholds haven't changed since they were set in 1983.§ 25AEducation credits: American Opportunity and Lifetime LearningUp to $2,500 a year per student for the first four years of college ($1,000 of it refundable), or up to $2,000 per return for any study. Both phase out between $80,000 and $90,000 of income ($160,000–$180,000 joint).§ 223Health savings accounts (HSAs)The only account that's tax-free going in, growing and coming out for medical costs. Up to $4,400 single or $8,750 family for 2026 — and from 2026, individual bronze and catastrophic plans qualify.§ 1411The 3.8% net investment income taxAn extra 3.8% on investment income once income passes $200,000 single or $250,000 married — thresholds that have never been adjusted for inflation since 2013.§ 2010The estate tax exemptionEstates owe federal estate tax only above $15 million per person in 2026 ($30 million for a married couple) — a level the 2025 law made permanent and now indexes for inflation.§ 10311031 exchanges: swapping real estate without paying tax yetSell investment or business real estate and buy another, and the gain can be deferred — if you identify the replacement within 45 days and close within 180.§ 6013Filing jointly, and what to do when your spouse isn't a US residentMarried couples can file one joint return. Both spouses are then liable for all of the tax. If one spouse is a nonresident, a joint return is only possible if both elect to treat that spouse as a US resident.§ 6501How long can the IRS audit me, and how long do I have to claim a refund?The IRS usually has 3 years from the day you file to assess more tax. It's 6 years if you left out more than 25% of your income, and unlimited if you never filed. You have 3 years to claim a refund.§ 2Filing status: single, married, head of household or surviving spouseYour filing status sets your tax brackets and your standard deduction. Head of household, for unmarried people who support a child or other relative at home, gets a $24,150 standard deduction for 2026 instead of $16,100.§ 6651Late-filing and late-payment penalties, and how to shrink themFiling late costs 5% of the unpaid tax a month, up to 25%. Paying late costs 0.5% a month, up to 25%. So if you can't pay, file on time anyway. Interest comes on top.§ 6159Can't pay your tax bill? IRS payment plansThe IRS lets you pay a tax bill in monthly installments. If you owe $50,000 or less, you can usually set up a plan online in minutes. A plan stops most collection, and if you filed on time it halves the late-payment penalty.