Answer
1) Yearly gross income = $72000
2) Adjusted Gross Income = $5225
Option B is correct.
3) Monthly Net Income = $4260.99
Explanation
1) Yearly gross income
Gross income is the total amount earned before all of the tax and deductions are removed. So, yearly gross income is the total amount earned in a year before all the deductions are made.
For this question, the monthly gross income is $6000
Since there are 12 months in a year,
Yearly gross income = 12 × $6000 = $72000
2) Adjusted Gross income
The adjusted gross income is used to calculate the taxes. It is what is left of the gross income when all the pre-tax deductions are made. Examples of the pre tax deductions in this question include
- Medical Insurance Pre-tax = $250
- 401k Pre-tax = 5%
- HSA Pre-tax = $225
Monthly Gross Income = $6000
Adjusted Gross Income = (Gross Income) - (Deductions)
Deductions = (250) + (5% × 6000) + (225)
= 250 + 300 + 225
= $775
Adjusted Gross Income = (Gross Income) - (Deductions)
= $6000 - $775
= $5225
3) Monthly net income
The monthly net income is the actual amount the person takes home. It is the Adjusted Gross Income less all the tax deductions.
For this question, the tax deductions include
- Income taxes = 12%
- Social security = 5%
- Medicare = 1.45%
Adjusted Gross Income = $5225
Monthly Net Income = (Agjusted Gross Income) - (Tax deductions)
Tax Deductions = (12% × 5225) + (5% × 5225) + (1.45% × 5225)
= (627) + (261.25) + (75.7625)
= $964.0125
Monthly Net Income = (Agjusted Gross Income) - (Tax deductions)
= $5225 - $964.0125
= $4260.9875
= $4260.99 to the nearest 2 decimal places
Hope this Helps!!!