income tax: taxable income

7
INCOME TAX: TAXABLE INCOME Taxes – Day 1 Notes

Upload: jetta

Post on 22-Feb-2016

65 views

Category:

Documents


0 download

DESCRIPTION

Income Tax: Taxable Income. Taxes – Day 1 Notes. Vocabulary. Gross Income: ALL income; e.g. salary, tips, interest on account, dividends Adjustments: Tax-deferred income that you get to subtract off your gross income e.g. IRAs, other retirement accounts, tax-deferred savings accounts - PowerPoint PPT Presentation

TRANSCRIPT

Page 1: Income Tax:  Taxable Income

INCOME TAX: TAXABLE INCOMETaxes – Day 1 Notes

Page 2: Income Tax:  Taxable Income

Vocabulary• Gross Income: ALL income;

• e.g. salary, tips, interest on account, dividends

• Adjustments: Tax-deferred income that you get to subtract off your gross income• e.g. IRAs, other retirement accounts, tax-deferred savings

accounts

• Adjusted Gross Income (AGI): Gross Income – Adjustments

Page 3: Income Tax:  Taxable Income

Vocabulary• Deductions: expenses that reduce taxable income

• E.g. college tuition, work expenses, interest on a mortgage, charitable contributions, state income taxes, medical expenses

• Standard Deduction: Deduction you can take instead of itemizing ($5950 for a single individual or $11,900 for a family)

• Exemptions: Reduce taxable income for each person you support ($3,800 per person)

• Taxable Income: Money that you can be taxed on; AGI – (Deductions and Exemptions)

Page 4: Income Tax:  Taxable Income

Example 1• Melissa earned wages of $42,000, received $250 in

interest from a savings account, and contributed $1200 to a tax-deferred retirement plan. She was entitled to a personal exemption of $3800 and to deductions totaling $5950. Find her gross income, adjusted gross income, and taxable income.

Page 5: Income Tax:  Taxable Income

Example 2• Eugene earned wages of $28,400, received $95 in

interest from a savings account, and had deductions totaling $6000. He has only 1 exemption. Find his gross income, adjusted gross income, and taxable income.

Page 6: Income Tax:  Taxable Income

Example 3• Mark works as a waiter at Applebee’s. In one year, he

earned $18,000 in salary and $1500 in tips. He received $50 in interest from a savings account. He contributed $1200 to a tax-deferred retirement plan. He has a wife and 1 child that he is supporting. He has contributed $195 to charity, has paid $250 to state income tax, and has paid $2000 for interest on a home mortgage. Calculate his gross income, adjusted gross income, and taxable income.

Page 7: Income Tax:  Taxable Income

Example 4• Isabella earned wages of $88,750, received $4900 in

interest from a savings account, and contributed $6200 to a tax-deferred retirement plan. She is supporting herself, her husband, and 2 children. She has contributed $9000 to charity, has paid $3500 for interest on her mortgage, and paid state income tax of $2750. Calculate his gross income, adjusted gross income, and taxable income.