7
AssignmentMultiple Choice

Careers, Salaries, and Lifetime Income

Question 7 • 26-27 Ignite Financial Literacy Personal Finance - EL3403

Say you are filing as a single taxpayer. You have a gross income of $61,026 and claim two exemptions. You can make a deduction of $2,871 for interest on your mortgage, a deduction of $2,376 for property tax, an adjustment of $3,206 for business losses, an adjustment of $2,575 for contributions to your retirement plan, a deduction of $2,682 for medical expenses, and an adjustment of $2,440 for business expenses. If exemptions are each worth $3,650 and the standard deduction is $5,700, what is your total taxable income?

Answer
A
$39,805
B
$35,526
C
$37,576
D
$43,276

Explanation

First subtract the adjustments from gross income: $61,026 − $3,206 − $2,575 − $2,440 = $52,805. The itemized deductions total $2,871 + $2,376 + $2,682 = $7,929, which is greater than the $5,700 standard deduction. Subtract the itemized deductions and two exemptions worth $3,650 each: $52,805 − $7,929 − $7,300 = $37,576. The correct choice is $37,576.

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