To calculate a budget deficit, subtract total revenue from total expenditures for the same period. If spending is higher, the difference is the deficit; if revenue is higher, you have a surplus; if the two match, the budget is balanced. The formula works identically for a federal fiscal year, a company’s quarter, or your own monthly finances. The Congressional Budget Office uses the same arithmetic to project a $1.9 trillion federal deficit for fiscal year 2026, with $7.4 trillion in spending against $5.6 trillion in revenue.1Congressional Budget Office. The Budget and Economic Outlook 2026 to 2036
The Formula
Budget Deficit = Total Expenditures − Total Revenue
A positive result is a deficit. A negative result is a surplus. Zero is a balanced budget. The period you measure has to be the same on both sides: a federal fiscal year runs October 1 through September 30, a business might use a calendar year or quarter, and a household typically works month to month.2USAGov. The Federal Budget Process
The arithmetic is the easy part. Most errors come from leaving money off one side of the equation. Build each total carefully before you subtract.
Adding Up Revenue
For a Government
Federal revenue comes mostly from individual income taxes and payroll taxes, with smaller contributions from corporate income taxes, excise taxes, customs duties, estate taxes, and fees for government services. Individual income tax rates for 2026 run from 10% to 37% across seven brackets, with the top rate reaching single filers earning above $640,600.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Corporate income is taxed at a flat 21%. CBO projects total federal revenue of $5.6 trillion in fiscal year 2026, roughly 17.5% of GDP.1Congressional Budget Office. The Budget and Economic Outlook 2026 to 2036
For a Household
Count gross income before taxes and benefit deductions: salary, wages, freelance earnings, rental income, interest, and investment dividends. The figure you want is total money received during the period, not take-home pay. Every inflow belongs in the total.
For a Business
Include sales revenue, accounts receivable actually collected during the period, and any other cash coming in from operations. The guiding question is simple: did money arrive during the period you’re measuring?
Adding Up Expenditures
For a Government
Federal spending falls into three categories. Mandatory spending covers programs like Social Security and Medicare that run automatically under existing law without annual appropriations votes, and makes up roughly 60% of total outlays. Discretionary spending covers everything Congress funds through annual appropriations, including defense, education, transportation, and research. Interest on the national debt is the third category and now large enough to track separately: net interest payments are projected to exceed $1.0 trillion in 2026, about 3.3% of GDP.4Congressional Budget Office. The Budget and Economic Outlook 2026 to 2036
For a Household
Add fixed costs (rent or mortgage, insurance premiums, loan payments) to variable costs (groceries, utilities, fuel, entertainment) and one-off expenses (medical bills, car repairs). The most common omission is small recurring charges: subscriptions, service fees, and automatic payments that quietly leave the account each month. Pull them in or your deficit figure will be too low.
For a Business
Count payroll, rent, supplies, taxes paid, debt service, and capital purchases. Depreciation is important for accounting but it isn’t cash leaving the business, so a straight deficit calculation uses actual money paid out during the period.
Where to Pull the Numbers
For federal figures, the Congressional Budget Office publishes projections and historical data on revenues, outlays, and deficits as a nonpartisan agency created by Congress for independent budget analysis.5Congressional Budget Office. Introduction to CBO For actual results rather than projections, the Department of the Treasury publishes the Monthly Treasury Statement, which breaks down receipts and outlays by source and agency.6U.S. Treasury Fiscal Data. Treasury Bulletin March 2026 Treasury’s Fiscal Data site offers interactive tools for deficit and debt figures over time.
For personal numbers, bank statements, credit card records, and tax returns are the starting point. Form 1040 captures annual income and anchors the revenue side.7Internal Revenue Service. About Form 1040, U.S. Individual Income Tax Return For spending, pull transaction histories from every account you use, including automated payments you might have forgotten. Business owners typically centralize invoices, payroll, and operating costs in accounting software.
A Worked Example
Applied to the CBO’s fiscal year 2026 projections:
- Total expenditures: $7.4 trillion
- Total revenue: $5.6 trillion
- Deficit: $7.4 trillion − $5.6 trillion = $1.8 trillion
CBO rounds its official projection to $1.9 trillion for the year, equal to about 5.8% of GDP.1Congressional Budget Office. The Budget and Economic Outlook 2026 to 2036
The same math scales down. If your household brought in $5,000 last month and spent $5,800, your monthly deficit is $800. Run the calculation across twelve months and you can see whether the gap is a one-time event or a pattern you need to address.
Putting the Number in Context
As a Share of GDP
Analysts rarely quote a government deficit as a raw dollar figure alone. The 2026 federal deficit works out to about 5.8% of GDP, and that ratio is what makes the number comparable across years and economies. Over the past 50 years, federal deficits have averaged about 3.8% of GDP, so the 2026 figure runs well above the historical norm.1Congressional Budget Office. The Budget and Economic Outlook 2026 to 2036 For a household, the parallel ratio is your deficit as a share of annual income, which tells you how much of a stretch it represents.
Deficit vs. Debt
These two numbers get mixed up constantly. The deficit is the shortfall in a single period. The national debt is the running total of every past deficit that hasn’t been repaid, minus any surpluses. Picture the deficit as water flowing into a bathtub each year and the debt as the total water level.
Federal debt held by the public is projected to reach 101% of GDP in 2026, meaning the government owes more than the entire economy produces in a year, and CBO projects it will climb to 120% of GDP by 2036, surpassing the previous historical high of 106% set in 1946 at the end of World War II.1Congressional Budget Office. The Budget and Economic Outlook 2026 to 2036 If you want to compare entities, the deficit tells you about this year’s choices and the debt tells you about every prior year’s choices added together.
If You’re Calculating for a State or Local Government
The federal rules don’t carry over. Nearly every state operates under some form of balanced-budget requirement. According to the National Conference of State Legislatures, 44 states require the governor to submit a balanced budget, 41 require the legislature to pass one, and 38 prohibit carrying a deficit forward into the next fiscal year.8National Conference of State Legislatures. NCSL Fiscal Brief – State Balanced Budget Provisions Some requirements are constitutional, others statutory, and enforcement ranges from automatic spending cuts to penalties on officials who violate the rules.
Practically, that means any deficit you calculate for a state is usually a short-term gap that has to be closed before the fiscal year ends, not a shortfall that can be rolled forward. States close the gap by tapping rainy-day funds, cutting spending mid-year, or raising revenue. Most maintain budget stabilization funds sized at roughly 2% to 15% of general fund revenue. At least 16 states also require voter approval before issuing general obligation debt, and several state constitutions prohibit it entirely.8National Conference of State Legislatures. NCSL Fiscal Brief – State Balanced Budget Provisions The math is the same; the legal framework around whether the deficit is allowed to exist is not.