Question

Terrell, an unmarried individual, has the following income items:

Self-employment income: $30,000
Interest income: $1,000
Dividend income: $500
Terrell's self-employment tax was $4,507. Terrell had $6,270 in itemized deductions and one dependent child (age 9) who lived with him for the entire year.
Calculate Terrell's adjusted gross income (AGI), taxable income, and tax liability.

Answer 1

To calculate Terrell's adjusted gross income (AGI), subtract deductions from his total income. Subtract any exemptions from AGI to calculate taxable income. Use the appropriate tax rates to determine tax liability.

Step-by-step explanation:

To calculate Terrell's adjusted gross income (AGI), we need to start with his total income and subtract any allowable deductions. Terrell's income items include self-employment income of $30,000, interest income of $1,000, and dividend income of $500.

Terrell can deduct his self-employment tax of $4,507 and his itemized deductions of $6,270.

So, Terrell's AGI can be calculated as follows: AGI = Total Income - Deductions. In this case, AGI = ($30,000 + $1,000 + $500) - ($4,507 + $6,270).

Once we have Terrell's AGI, we can calculate his taxable income by subtracting any exemptions from his AGI. Taxable income is calculated as follows: Taxable Income = AGI - Exemptions. Since Terrell has one dependent child, he can claim an exemption for himself and his child.

Finally, Terrell's tax liability can be determined based on his taxable income using the appropriate tax rates for his filing status. We would need additional information to calculate the exact tax liability.