Question

You earn $15 an hour, contribute $5,000 to your 401(k), have a $15,000 standard deduction, and have a 10% tax rate. What is your taxable income: $______

a) $5,250
b) $6,000
c) $8,250
d) $9,000

Answer 1

To determine the taxable income, calculate the annual earnings with the hourly rate, subtract the 401(k) contribution, and apply the standard deduction. The taxable income in this scenario is $11,200, which does not match any of the provided options, indicating a possible error in the question.

Step-by-step explanation:

To calculate the taxable income, we need to consider the hourly wage, the 401(k) contribution, the standard deduction, and the tax rate. First, we determine the annual earnings from the given hourly rate, then apply the 401(k) contribution and the standard deduction to find the taxable income. Let's calculate it step by step:

• Determine annual earnings: Assuming a full-time job at 40 hours per week for 52 weeks a year, the annual earnings would be 40 hours × 52 weeks × $15/hour = $31,200.
• Subtract 401(k) contribution: $31,200 - $5,000 = $26,200.
• Apply the standard deduction: $26,200 - $15,000 = $11,200.
• Since the tax rate is not used to calculate taxable income but is instead applied to the taxable income to calculate the amount of tax owed, we can ignore it for this step.

The taxable income is therefore $11,200, which is not one of the options provided (a) $5,250, (b) $6,000, (c) $8,250, (d) $9,000. It appears there may be an error in the provided options.