For tax purposes, gross income is all the money a person receives i.docx - For tax purposes"gross income is all the money a person receives in a given

For tax purposes, gross income is all the money a person receives i.docx

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For tax purposes, "gross income" is all the money a person receives in a given year from any source. But income taxes are levied on "taxable income" rather than gross income. The difference between the two is the result of many exemptions and deductions. To see how they work, suppose you made $70,000 last year in wages, $10,000 from investments, and were given $5,000 as a gift by your grandmother. Also assume that you are a single parent with one small child living with you. Instructions: Enter your answers as whole numbers. a. What is your gross income? b. Gifts of up to $12,000 per year from any person are not counted as taxable income. Also, the "personal exemption" allows you to reduce your taxable income by $3,650 for each member of your household. Given these exemptions, what is your taxable income? c. Next, assume you paid $700 in interest on your student loans last year, put $2,000 into a health savings account (HSA), and deposited $4,000 into an individual retirement account (IRA). These expenditures are all tax
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