Question

5. Zach had a salary of $75,000 last year. He also received $4,500 in interest income from a CD he opened a few years ago. He contributed $4,000 to an IRA and had to move to another state for his new job. His moving expenses were $5,000. He is an unmarried man, with no dependents, and claims himself as an exemption. Standard deduction is $5700 for single, and exemption rate is $3,650 per exemption.

Part 1: What was Zach's gross income?
Part 2: What is Zach's Adjusted Gross Income (AGI)
Part 3: What is Zach's taxable income

Answer 1

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Explanation:

Part 1: To find Zach's gross income, we need to add up all of his sources of income. Zach had a salary of $75,000 last year, and he received $4,500 in interest income from a CD, so his gross income is $75,000 + $4,500 = $79,500.

Part 2: To find Zach's Adjusted Gross Income (AGI), we need to subtract any adjustments from Zach's gross income. Zach contributed $4,000 to an IRA and had moving expenses of $5,000, so his total adjustments are $4,000 + $5,000 = $9,000. Subtracting these adjustments from Zach's gross income, we get AGI = $79,500 - $9,000 = $70,500.

Part 3: To find Zach's taxable income, we need to subtract Zach's standard deduction and exemption amount from his AGI. Zach is an unmarried man with no dependents, so he is allowed one exemption of $3,650. His standard deduction as a single person is $5,700. Subtracting these amounts from Zach's AGI, we get taxable income = $70,500 - $3,650 - $5,700 = $61,150.

Therefore, Zach's gross income was $79,500, his AGI was $70,500, and his taxable income was $61,150.