Final answer:
Gross income comprises all money received from various sources, such as wages, investments, and gifts. To calculate your gross income, add up these amounts. In the given scenario, your gross income would be $65,000 ($50,000 in wages, $10,000 from investments, and $5,000 as a gift).
Step-by-step explanation:
Understanding Gross Income and Taxable Income
The term gross income is used to describe all the money a person receives in a given year from any source, which includes wages, investment income, and gifts. However, taxable income is the amount of income that is actually subject to taxation, and this amount is determined after accounting for various exemptions and deductions that the tax code provides. To illustrate, based on your situation of making $50,000 last year in wages, $10,000 from investments, and receiving a $5,000 gift, the calculation of your gross income would simply be the sum of these amounts.
Calculation of Gross Income
To calculate your gross income, you simply add up all your sources of income:
- Wages: $50,000
- Investment Income: $10,000
- Gift Received: $5,000
Thus, your gross income for the year would be:
$50,000 (wages) + $10,000 (investments) + $5,000 (gift) = $65,000.
It's important to note that for tax purposes, not all gifts may be considered taxable income, but they are still a part of your gross income. Ultimately, your taxable income might be less than your gross income after accounting for deductions and exemptions specific to your filing status and any dependents you may have.
To further understand the difference between gross and taxable income, and to apply potential deductions and exemptions to find the taxable income, it's advisable to consult with a tax professional or use tax preparation software.