In computing taxable income, what is subtracted last after determining AGI and the standard deduction?

The correct answer is indeed the exemption amount. In the process of computing taxable income, after determining Adjusted Gross Income (AGI) and applying the standard deduction, the final subtraction involves exemptions. Historically, personal exemptions were used to reduce taxable income for the taxpayer and their dependents. Although personal exemptions have been suspended through 2025 by recent tax legislation, they are still conceptually the last item subtracted in the income computation process.

This understanding is essential because it helps clarify the order of deductions and adjustments when calculating taxable income. In practical terms, after arriving at AGI and deducting the standard deduction, the exemption amount (if applicable) would be applied last before arriving at the final taxable income figure.

The other options, while relevant to other aspects of income calculations, do not pertain to this particular step in the taxable income determination process. Total adjustments affect AGI, employer-sponsored coverage influences the calculation of health care tax implications, and HIRE exempt wages relate to specific types of employment income, rather than directly to the standard process of calculating taxable income.