Question

A man earned wages of $32,700, received $1800 in interest from a savings account, and contributed $3800 to a tax-deferred retirement plan. He was entitled to a personal exemption of $4050 and had deductions totaling $7280. Find his gross income, adjusted gross income, and taxable income.

Answer 1

The man's gross income is $34,500, adjusted gross income is $30,700, and taxable income is $19,370, after accounting for interest, retirement contributions, deductions, and exemptions.

Step-by-step explanation:

To calculate gross income, adjusted gross income, and taxable income, we need to follow these steps:

1. Gross Income: This is the total income earned before any deductions or exemptions. In this case, the man's gross income would be the total of his wages and interest income, which is $32,700 + $1,800 = $34,500.
2. Adjusted Gross Income (AGI): This is calculated by subtracting any contributions to a tax-deferred retirement plan from the gross income. Therefore, the adjusted gross income is $34,500 - $3,800 = $30,700.
3. Taxable Income: This is the amount of income that is subject to income tax. To find this, we subtract the total of deductions and personal exemptions from the adjusted gross income. So, the taxable income is $30,700 - ($7,280 + $4,050) = $19,370.

To summarize:

• Gross Income = $34,500
• Adjusted Gross Income = $30,700
• Taxable Income = $19,370