Question

4. Calculating taxable income

For 2016, the personal exemption amount is $4,050. The 2016 standard deduction is $6,300 for unmarried taxpayers or married taxpayers filing separately, $12,600 for married taxpayers filing jointly, and $9,300 for taxpayers filing as head of household.

Calculating Lynn’s Taxable Income

Lynn is an unmarried person filing single. Calculate Lynn’s 2016 taxable income by filling in the worksheet. Enter adjustments, deductions, and exemptions as negative numbers. If your answer is zero, enter "0".

• Lynn will earn $80,965 in wages this year.
• She contributed $4,000 to an IRA.
• She received a gift from her parents to put a down payment on a new car totaling $5,000.
• She uses the standard deduction.
• She donated $1,000 to charity.
• She is entitled to one exemption.

2016 Taxable Income	Show How You Got Your Answers
Gross income	$__________________
Less: Adjustments to income	-___________________
Adjusted gross income	$__________________
Less: Deductions	-___________________
Subtotal	$__________________
Less: Exemptions	-___________________
Taxable income	$__________________

Answer 1

Gross income	$80,965
Less: Adjustment to income [Contribution to IRA]	$ 4,000
Adjusted gross income	$ 76,965
Less: Deductions [ Standard deduction ]	$ 6,300
Subtotal	$ 70,665
Less: Exemption [Personal exemption]	$ 4,050
Taxable income	$ 66,615

Note : 1) Donations to charity of $ 1,000 is an itemized deduction and can't be [ deductible ] use, when standard deduction has been used.

2) Gift from parents of $ 5,000 is not a taxable income and doesn't related with any tax consideration. It is totally excluded from taxable income calculation.