Suppose your friend earned wages of $93,260

Question

Suppose your friend earned wages of $93,260, received $1340 in interest from a savings account, and contributed $6300 to a tax deferred retirement plan. She is entitled to a personal exemption of $3500 and a standard deduction of $7800. The interest on her home mortgage was 4500, she contributed $2500 to charity, and she paid $1359 in state taxes.  Find the gross income and taxable income.

Answer 1

Total Income is:

• Wages + Interest

 

Taxable Income is:

• Total Income less
• Tax deferred retirement plan (only if box 13 on Form W-2 is not checked for Retirement Plan, otherwise this cannot be deducted if the friend participates in the employer plan) less
• Personal Exemption less
• The greater of standard deduction or itemized deduction (interest on her home mortgage plus charitable contributions)