Computing Taxable Income: Ross Martin arrived at the following tax information… Gross salary: $56,145 Interest earnings: $205 Dividend income: $65 Standard deductions: $12,000 Itemized deductions: $11,250 Adjustments (subtractions) to income: $1,200 What amount would Ross report as taxable income?
Concept Review 3.1- Please turn to page 151 of the text and complete Financial Planning Problem 1. (
Computing Taxable Income: Ross Martin arrived at the following tax information…
Gross salary: $56,145
Interest earnings: $205
Dividend income: $65
Standard deductions: $12,000
Itemized deductions: $11,250
Adjustments (subtractions) to income: $1,200
What amount would Ross report as taxable income?
1) Taxable income: Gross income of person is calculated from all resources , thereafter deduction provided by income tax law is deducted to arrive at taxable income.
Taxable income = Gross income - Deduction
On taxable income tax is calculated at specified rates. This tax is payable to the government.
2) Standard deduction: Standard deduction are lump sum deduction provided by income tax law.
3) Itemized deduction: Itemized deduction are those where individual avail deduction item wise. For example deduction for life insurance, medical insurance etc.
4) Which deduction to avail: Standard deduction or itemized deductions whichever is higher are to be availed.
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