Question

Imari Brown arrived at the following tax information:

Tax Information
Gross salary - $ 36,145
Additional small business income - 10,000
Interest earnings - 205
Dividend income - 65
Standard deduction - 12,550
Itemized deductions - 14,250
Adjustments (subtractions) to income - 5,000
What amount would Imari report as taxable income?

Answer 1

Imari Brown's taxable income is calculated by summing all sources of income, subtracting adjustments to income, and then deducting the larger of the standard or itemized deductions from the adjusted gross income. The calculated taxable income is $27,165.

Step-by-step explanation:

To calculate Imari Brown's taxable income, we need to consider the various sources of income and the deductions applicable. The basic formula we will use here, in accordance with the basic concepts of taxation, is:

taxable income = adjusted gross income - deductions.

1. Calculate the total gross income.
   gross salary + small business income + interest earnings + dividend income
   
   = $36,145 + $10,000 + $205 + $65
   
   = $46,415
2. Deduct the adjustments to income from the total gross income.
   
   $46,415 - $5,000 (adjustments to income)
   
   = $41,415 (adjusted gross income)
3. Choose the larger deduction between the standard deduction and itemized deductions.
   
   The greater of standard deduction ($12,550) and itemized deductions ($14,250) is the itemized deductions.
4. Subtract the chosen deduction from the adjusted gross income to find taxable income.
   
   $41,415 - $14,250 (itemized deductions)
   
   = $27,165 (taxable income)

Therefore, Imari Brown would report $27,165 as taxable income.