This is my first time joining! I have a question. I don't know how to figure out any of the questions in this picture...someone help?

- anonymous

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- anonymous

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- anonymous

@jim_thompson5910 @zepdrix @.Sam. @ganeshie8 @aaronq

- jim_thompson5910

how far did you get?

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## More answers

- anonymous

im still stuck on number 1. :(

- anonymous

@jim_thompson5910 ??

- jim_thompson5910

ok sorry, one sec, I'm reading an article on how to calculate all this
it's definitely a lot, but I think I can translate it all for you

- anonymous

wow thank you so much :)

- anonymous

is it too difficult? :(

- jim_thompson5910

no I think it's doable, still reading though

- anonymous

oh thank god!!!!

- jim_thompson5910

according to this page here
http://www.obliviousinvestor.com/the-difference-between-exemptions-deductions-and-credits/
it states that
"The IRA contribution is an above the line deduction, and the charitable donation is a below the line"
and from this page here: http://www.irs.gov/taxtopics/tc456.html
it states that
"The deduction is claimed as an adjustment to income so you do not need to itemize your deductions"
so this means that student loan interest deductions are above the line deductions
-------------------------------------------------------
so what this means is that you start with the gross income of 24600, then you subtract off the above the line deductions to get
(gross income) - (IRA contributions) - (student loan interest payments)
(24600) - (600) - (1675)
22,325
So the adjusted gross income (AGI) is $22,325

- jim_thompson5910

this is a lot and it's all for #1, hopefully it all makes sense (read it over a few times if it doesn't)

- anonymous

oh my gosh ok one second

- anonymous

ok my dad just explained it a little better to me:) thank you!

- jim_thompson5910

that's great

- anonymous

alright so how do we go about number 2?

- jim_thompson5910

there is only one itemized deduction in this case, and it is the $940 in charitable donations made

- jim_thompson5910

so you have a choice, you can either choose
a) the standard deduction of $5700
OR
b) the itemized deductions of $940
which one do you choose?

- anonymous

oh my gosh im sorry my account got messed up i used an email i could verify haha but ummmm lets go with the standard :)

- anonymous

@jim_thompson5910

- jim_thompson5910

good choice, you can choose whichever option you want, but if you want to save more money, you go with the higher deduction

- jim_thompson5910

so that wraps up #2

- jim_thompson5910

for #3, there are 2 personal exemptions: you and your kid
each exemption is 3650, so 2 of those exemptions gives you 2*3650 = 7300
so the value of your exemptions is 7300

- anonymous

okay :) whats next?

- jim_thompson5910

finally for #4, you subtract off the deductions and the exemptions
so...
(AGI) - (deductions) - (exemptions)
(22325) - (5700) - (7300)
9,325
this means that the final taxable income is $9,325

- anonymous

wait! i thought we were on number 3?

- jim_thompson5910

#3 is just calculating the exemptions

- jim_thompson5910

#4 is calculating the taxable income

- jim_thompson5910

once you get 7300 in exemptions, you're done with #3

- anonymous

i dont get it? can you show the work for number 3 so i understand?

- jim_thompson5910

all you do for #3 is 2*3650 = 7300

- jim_thompson5910

not much work to show really

- jim_thompson5910

remember there are 2 exemptions: you and your child

- anonymous

oh now i feel super stupid :( lol

- jim_thompson5910

its ok, you're not dumb

- anonymous

wow. @jim_thompson5910 i applaud you

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