3. 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!
4. 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.
5. Earned Income
+
Unearned Income
=
Gross Income
Now you will take this amount and legally whittle
it down using exemptions and deductions to
get your
Adjusted Gross Income.
6. 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….
7. 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).
8. 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.
9. 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.
10. 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.
