Question

# Compute the gross​ income, adjusted gross​ income, and taxable income in the following situation. Use the...

Compute the gross​ income, adjusted gross​ income, and taxable income in the following situation. Use the exemptions and deductions in the table to the right. Explain how it was decided whether to itemize deductions or use the standard deduction.

Sara is​ married, but she and her husband filed separately.

Her salary was \$50,800​, and she earned \$260 in interest. She had \$5700 in itemized deductions and claimed four ​exemptions, for herself and three children.

Tax Rate

Married Filing Separately

​10%

up to​ \$9325

​15%

up to​ \$37,950

​25%

up to​ \$76,550

​28%

up to​ \$116,675

​33%

up to​ \$208,350

​35%

up to​ \$235,350

​39.6%

above​ \$235,350

Standard deduction

​\$6350

Exemption

​(per person)

​\$4050

Sol :

 Particulars Amount Computation 1.Gross Income \$51060 1 = Salary Income + Interest Income 2.Exemptions - Note 1 3.Adjusted Gross Income \$51060 3=1-2 4.Standard Deduction \$6350 Higher of Standard deduction and Itemized deduction 5.Itemized Deductions \$5700 Note 2 6. Standard deduction \$6350 6 = 4>5 7.Taxable Income \$44710 7=3-6

Tax Liability = (0-9325)*10%+(37950-9325)*15%+(44710-37950)*25%

= 932.50 + 4293.75 + 1690

= 6916.25

Note 1: Income tax exemption are specific income that is not included in calculation tax liability.

Note 2: Can claim standard deduction or itemized deductions whichever to lower taxable income.

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