Question

TAXABLE INCOME: The U.S. government considers the income of a family (or individual) to include the sum of any money earned from a husband’s or wife’s jobs, and money made from their personal businesses or investments. The taxes for a household (i.e., an individual or family) are not computed from the income; rather, they are computed from the household’s taxable income. For many families, the household’s taxable income is simply the household’s income minus exemption deductions and minus standard deductions: (taxable income) = (income) − (exemption deduction) − (standard deduction) All of the problems we will model in this lesson will use this equation to find a family’s taxable income. The only exception is if the family’s taxable income is less than zero, in which case we will say that the family’s taxable income is just $0. Use this formula and the tables above to answer the following questions about taxable income: Find the taxable income of a single person with no kids, who has an income of $55,000. Find the taxable income of a married couple with two children, who have a combined income of $55,000. Find the taxable income of a married couple with one child, who has a combined income of $23,000.

Answer 1

The Solution.

The given formula for taxable income is

$TI=I-ED-SD$

In this case,

T I = taxable income, I = income, ED = exemption deduction, SD = standard deduction.

a. The taxable income of a single person with no kids, and has an income of $55,000.

$\begin{gathered} TI=I-ED-SD \\ \text{where I=\ 55000, ED =3900, SD=6100} \end{gathered}$

Substituting these values in the formula, we have

$\begin{gathered} TI=55000-3900-6100 \\ TI=55000-10000=\text{ \ 45000} \end{gathered}$

b. The taxable income of a couple with two children, and with a combined income of $55,000.

$\begin{gathered} TI=I-ED-SD \\ \text{where I=\ 55000, ED =15600, SD=12200} \end{gathered}$

Substituting these values in the formula, we have

$\begin{gathered} TI=55000-15600-12200 \\ TI=55000-27800=\text{ \ 27200} \end{gathered}$

c. The taxable income of a couple with two children, and with a combined income of $23,000.

$\begin{gathered} TI=I-ED-SD \\ \text{where I=\ 23000, ED =11700, SD=12200} \end{gathered}$

Substituting these values in the formula, we have

$\begin{gathered} TI=23000-11700-12200 \\ TI=23000-23900=\text{ \ -900} \\ \text{Hence, the taxable income in this case is zero dollar, that is,} \\ TI=\text{ \ 0} \end{gathered}$