Question

Your gross income is $91 thousand. The standard deduction is $12000. You contributed $15 thousand to your traditional 401k, and your employer made a matching contribution of 50 cents on the dollar. You also contributed to your Roth IRA for the year, making an $5500 contribution. What is your taxable income for the year?

Answer 1

To calculate your taxable income, you can follow these steps:

1. Start with your gross income: $91,000.

2. Subtract the standard deduction: $91,000 - $12,000 = $79,000.

3. Deduct your traditional 401(k) contribution: $79,000 - $15,000 = $64,000.

4. Account for the employer's matching contribution. If your employer matched 50 cents on the dollar for your $15,000 contribution, that's an additional $7,500 that you don't have to include in your taxable income. Subtract this amount: $64,000 - $7,500 = $56,