The Mannings file a tax return showing $125000 in earned income, $3288 from interest income, and they have a tax credit of 1% of their earned income. They claim 5 exemptions of $2500 each, one head of household exemption of $10500, pre-tax medical deductions of $125 weekly, and a pre-tax retirement contribution of $100 weekly. What is their adjusted gross income?
To calculate the adjusted gross income (AGI) for the Mannings, we need to add up their earned income, interest income, and any adjustments they may have.
First, let's calculate the total earned income:
Earned income = $125,000
Next, let's calculate the total interest income:
Interest income = $3,288
Now let's calculate the total adjustments:
1. Tax credit: The tax credit is 1% of their earned income.
Tax credit = 1% of $125,000 = $1,250
2. Exemptions: They claim 5 exemptions of $2,500 each and one head of household exemption of $10,500.
Exemptions = (5 * $2,500) + $10,500 = $23,500
3. Pre-tax deductions:
Medical deductions = $125 per week * 52 weeks = $6,500
Retirement contribution = $100 per week * 52 weeks = $5,200
Now let's calculate the AGI:
AGI = Earned income + Interest income - Total adjustments
AGI = $125,000 + $3,288 - ($1,250 + $23,500 + $6,500 + $5,200)
AGI = $125,000 + $3,288 - $36,450
AGI = $91,838
Therefore, the adjusted gross income (AGI) for the Mannings is $91,838.