Embed Size (px)
What really counts?
Money paid for work. Includes: Salary, Wages, Tips, Commissions, & Bonuses. Unemployment Benefits Sick Pay And some noncash fringe benefits your employer provides
-- a company car, discounts on property or services, country club memberships, tickets to entertainment or sporting events, life insurance coverage of more than $50,000!
Money received from interest or dividend payments,
Profits from assets you sold. Business & farm income. Rent, royalties (like what a musician earns when their
song is played on the radio), gambling winnings, and alimony payments.
Earnings from your retirement fund and Social security are also considered unearned income. are considered unearned income, as are Social Security payments.
Alimony is considered unearned income.
Earned Income +
Unearned Income =
Now you will take this amount and legally whittle it down using exemptions and
deductions to get your Adjusted Gross Income.
By using legally allowed adjustments & subtractions and…
Depending on your filing status and the form you file
You will take these amounts and subtract them from your Gross Income to get the Adjusted Gross Income
Plus, you can deduct even more….
Filing Status: There are 5 different types of filing status-Single, Married Filing Jointly, Married Filed Separately, Head of Household, Qualifying Widow(er) with Dependent Child- each receives a Standard Pre-set Deduction
Tax-Allowable Expenses: Mortgage Interest, Charitable Contributions, Large Medical Expenses (that are greater than the standard deduction amount).
People that depend on you for support– such as…Spouse, kids, possibly parents, and yourself.
The IRS allows you to multiply this number of people by a dollar amount (adjusted for inflation annually) and then subtract it from your income.
After all these adjustments, exemptions, deductions, and subtractions, you now have your taxable income.
This is the dollar amount you look for in the tax tables to see what your tax bill is.
Child Support is not considered income by the person receiving it and cannot be taken as a deduction by the person paying it. Because it is money used to support someone – other than the person receiving it- the child.
Alimony IS considered income by the person receiving it and must be reported by the person paying it and receiving it.