My standard deduction is $5350 and personal exemption is $3400. The way it was explained to me, if I add these together, it is the amount of money out of what I make during the year that is not subject to federal income tax.
If I make a few hundred dollars over this amount as gross income during the year (summer job), is all of my gross income that is subject to federal income tax or is it GROSSINCOME-(standard deduction+personal exemption) that is able to be taxed by federal income tax?
2007-06-07 09:16:27 · 3 answers · asked by comemrtaxman 1 in Business & Finance ➔ Taxes ➔ United States
thank you all
2007-06-07 09:54:10 · update #1
The tax rate is applied to the taxable income, which is your gross minus the exemption and standard deduction. The rate would be 10% for the first $7,550 and 15% on the amount over $7,550 until you reach $30,650. I would guess that you would not be concerned about amount above that at this point.
2007-06-07 09:22:53 · answer #1 · answered by ? 6 · 1⤊ 0⤋
Taxable Income = Gross Income - Personal Exemption - Standard Deduction.
If you make a few hundred dollars over, only that amount is subject to tax. You can't fall behind by making more money. Make as much as possible.
2007-06-07 09:21:17 · answer #2 · answered by Wayne Z 7 · 0⤊ 0⤋
In your example, only the few hundred dollars that's over the total of your standard deduction plus personal exemption would be taxed.
2007-06-07 14:44:58 · answer #3 · answered by Judy 7 · 0⤊ 0⤋