Question

Suppose a single taxpayer earned wages of $52,400 and contributed $7,860 to a tax- deferred retirement plan. (a) (5 points) What is the taxpayer's gross income? (b) (5 points) What is the taxpayer's adjusted gross income?

Answer 1

(a) $52,400

(b) $44,540.

Explanation:

(b) $52,400 - $7,860 = $44,540

tax-deferred retirement plans like

401k

are great because

$7,860 wouldve been lost to taxes.

instead it goes to retirement