Final Answer:
Herold's total income is $66,500 (wages) + $1,100 (taxable interest) = $67,600. His adjusted gross income is calculated by subtracting the contributions to the tax-deferred retirement account: $67,600 - $3,300 = $64,300. With no dependents and filing as single, and considering the standard deduction of $12,000 for his filing status, Herold's taxable income is $64,300 - $12,000 = $52,300. Using the 2018 tax table for a single filer, the approximate income tax for Herold would be determined based on this taxable income.
Step-by-step explanation:
Herold's total income comprises his wages and taxable interest, which sum up to $67,600. To calculate adjusted gross income (AGI), we subtract the contributions to the tax-deferred retirement account from the total income. In this case, $67,600 - $3,300 = $64,300. AGI is a crucial figure as it determines various deductions and credits.
Next, we compute Herold's taxable income by subtracting the standard deduction for his filing status from his AGI. The standard deduction for a single filer in 2018 is $12,000. Therefore, $64,300 - $12,000 = $52,300 is Herold's taxable income. This amount is used to find the income tax in the 2018 tax table for single filers. The tax table provides the applicable tax rate for the given taxable income range, and rounding to the nearest dollar gives the final income tax liability. The tax tables factor in the progressive nature of income taxation, where different portions of income are taxed at different rates.