For tax purposes, "gross income" is all the money“taxable income" rather than gross income. The difference between the two is the result of many exemptions and deductions.To see how they work, suppose you made $60,000 last year in wages, earned $10,000 from investments, and received a gift of$5,000 from your grandmother. Also assume that you are a single parent with one small child living with you.person receives in a given year from any source. But income taxes are levied onInstructions: Enter your answers as a whole number.a. What is your gross income?$b. Gifts of up to $15,000 per year from any person are not counted as taxable income. Also, the personal exemption allows you toreduce your taxable income by $4,050 for each member of your household. Given these exemptions, what is your taxable income?2$c. Next, assume you paid $700 in interest on your student loans last year, put $2,000 into a health savings account (HSA), anddeposited $4,000 into an individual retirement account (IRA). These expenditures are all tax exempt, meaning that any money spenton them reduces taxable income dollar-for-dollar. Knowing that fact, now what is your taxable income?d. Next, you can either take the so-called standard deduction or apply for itemized deductions (which involve a lot of tediouspaperwork). You opt for the standard deduction that allows you as head of your household to exempt another $18,350 from yourtaxable income. Taking that deduction into account, what is your taxable income?2$e. Apply the tax rates shown in the table below to your taxable income.Total Taxable IncomeMarginal Tax Rate %$0 - $19,40e$78,950$168,400$321,45010%$19,401$78,951$168,40112%22%24%$321,451$408, 20032%$408,201$612,35035%$612,351 and above37%How much federal income tax will you owe?Instructions: Enter your answer rounded to 2 decimal places.$What marginal tax rate applies to your last dollar of taxable income?]percentf. As the parent of a dependent child, you qualify for the government's $2,000 per-child "tax credit." Like all tax credits, this $2,000credit "pays" for $2,000 of the tax you owe. Given this credit, how much money will you actually have to pay in taxes?Instructions: Enter your answer rounded to 2 decimal places.$Using that actual amount, what is your average tax rate relative to your taxable income in part d?Instructions: Enter your answer rounded to 1 decimal place.]percentWhat is your average tax rate relative to your gross income?Instructions: Enter your answer rounded to 1 decimal place.percent

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For tax purposes, "gross income" is all the money a person receives in a given year from any source. But income taxes are levied on &Idquo;taxable income" rather than gross income. The difference between the two is the result of many exemptions and deductions. To see how they work, suppose you made $60,000 last year in wages, earned $10,000 from investments, and received a gift of $5,000 from your grandmother. Also assume that you are a single parent with one small child living with you. Instructions: Enter your answers as a whole number. a. What is your gross income? b. Gifts of up to $15,000 per year from any person are not counted as taxable income. Also, the personal exemption allows you to reduce your taxable income by $4,050 for each member of your household. Given these exemptions, what is your taxable income? $ c. Next, assume you paid $700 in interest on your student loans last year, put $2,000 into a health savings account (HSA), and deposited $4,000 into an individual retirement account (IRA). These expenditures are all tax exempt, meaning that any money spent on them reduces taxable income dollar-for-dollar. Knowing that fact, now what is your taxable income?

For tax purposes, "gross income" is all the money a person receives in a given year from any source. But income taxes are levied on &Idquo;taxable income" rather than gross income. The difference between the two is the result of many exemptions and deductions. To see how they work, suppose you made $60,000 last year in wages, earned $10,000 from investments, and received a gift of $5,000 from your grandmother. Also assume that you are a single parent with one small child living with you. Instructions: Enter your answers as a whole number. a. What is your gross income? b. Gifts of up to $15,000 per year from any person are not counted as taxable income. Also, the personal exemption allows you to reduce your taxable income by $4,050 for each member of your household. Given these exemptions, what is your taxable income? $ c. Next, assume you paid $700 in interest on your student loans last year, put $2,000 into a health savings account (HSA), and deposited $4,000 into an individual retirement account (IRA). These expenditures are all tax exempt, meaning that any money spent on them reduces taxable income dollar-for-dollar. Knowing that fact, now what is your taxable income?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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