The Wilson has an annual income of 44,160$. They claim 4 exemptions and file a joint return. What is their taxable income?
To calculate the Wilsons' taxable income, we need to deduct their exemptions and apply the appropriate tax brackets. Let's break down the steps to find the answer:
1. Determine the exemptions: The number of exemptions claimed affects the taxable income. The number of exemptions for the Wilsons is given as 4.
2. Find the adjusted gross income (AGI): To find the AGI, we need to start with the annual income provided, which is $44,160.
3. Calculate the AGI after exemptions: Multiply the number of exemptions (4) by the exemption amount for the relevant tax year. In 2021, each exemption is $4,300. Thus, the total exemption amount is $4,300 * 4 = $17,200. Subtract this exemption amount from the AGI: $44,160 - $17,200 = $26,960.
4. Apply tax brackets: Tax brackets determine the percentage of income that should be taxed. The tax rates for joint filers in 2021 are:
- 10% on income up to $19,900
- 12% on income between $19,901 and $81,050
- 22% on income between $81,051 and $172,750
- ...
Since the Wilsons' income falls between $19,900 and $81,050, the tax rate is 12%.
5. Calculate taxable income: Multiply the remaining AGI after exemptions by the applicable tax rate, which is 12%: $26,960 * 0.12 = $3,235.20.
Hence, the Wilsons' taxable income is $3,235.20.