Final answer:
Manny's taxable income is the portion of his adjusted gross income subject to tax after deductions and exemptions. The calculation is complex, but essentially subtracts specific deductions from total gross income to determine the payable tax.
Step-by-step explanation:
The taxable income of Manny, a single taxpayer earning $65,000 per year, refers to the portion of his adjusted gross income that is subject to income tax after deductions and exemptions. Adjusted gross income (AGI) is a taxpayer's total gross income minus specific deductions. For example, taxable income on the 1040EZ form is calculated as adjusted gross income minus the sum of deductions and exemptions. Taxable income determines how much tax the taxpayer owes according to the tax rates for different income levels. In the United States, income tax is progressive, meaning that as a taxpayer's income increases, the marginal tax rate also increases. This system is structured so that higher levels of income fall into higher tax brackets, resulting in a larger fraction of additional income being taxed at these higher rates.