Final answer:
The statement is true as the adjusted gross income (AGI) is determined before taxable income (TI) in the Federal income tax formula for individuals.
Step-by-step explanation:
The statement is true: Under the Federal income tax formula for individuals, the determination of adjusted gross income (AGI) indeed precedes that of taxable income (TI). AGI is calculated by taking into account various sources of income and making certain adjustments. Once AGI is established, standard deductions and exemptions (or itemized deductions if applicable) are subtracted to arrive at the taxable income. The tax system is based on a progressive scale, meaning that as an individual's income increases, not only does the total tax amount increase, but the rate at which additional income is taxed also increases. This two-tiered approach is evident in tax diagrams, where, with higher levels of AGI, the line representing the tax owed becomes steeper, indicating higher marginal tax rates for higher income brackets. It's important to understand this process when considering personal tax liabilities or when studying economics. Additional factors such as tax credits or the alternative minimum tax can also impact an individual's final tax liability.