Question

Jack's earning for last year were $345,000 and he got $2000 in interest. If he deposited $5000 to a tax-deferred plan, calculate his Gross Income, his Adjusted Gross income and his Taxable income. (He is filing as a single)

Answer 1

Jack's Gross Income would be the sum of his earnings and interest, which is $345,000 + $2,000 = $347,000.
His Adjusted Gross Income (AGI) would be calculated by subtracting his contribution to the tax-deferred plan from his Gross Income. Therefore, his AGI would be $347,000 - $5,000 = $342,000.
Finally, Jack's Taxable Income would be calculated by subtracting the standard deduction for a single filer ($12,400 in 2020) from his AGI. Therefore, his Taxable Income would be $342,000 - $12,400 = $329,600.
It's important to note that there may be other deductions or credits that could further reduce Jack's taxable income and ultimately lower his tax liability.