A man earned wages of 46700 received 1400 in interest from a

A man earned wages of $46,700, received $1400 in interest from a savings account, and contributed $3500 to a tax-deferred retirement plan. He was entitled to a personal exemption of $2700 and had deductions totaling $5400. Find his gross income, adjusted gross income, and taxable income.

Solution

Gross income is total personal income, before accounting for taxes or deductions.

Gross income = $46,700 + $1400 - $3500 = $44,600

Adjusted Gross income is an individual\'s total gross income minus specific deductions.

Adjusted Gross income = $44,600 - $5400 = $39,200

Taxable income is adjusted gross income minus allowances for personal exemptions

Taxable income = $39200 - $2700 = $36,500