- Calculate AGI by subtracting adjustments from gross income: \(\$23,670 - \$0 = \$23,670\).
- Calculate taxable income by subtracting exemptions and deductions from AGI: \(\$23,670 - \$12,400 - \$0 = \$11,270\).
- The final result is AGI of \(\$23,670\) and taxable income of \(\$11,270\).
- The correct choice is \(\boxed{\$23,670 \text{ and } \$11,270}\).
Explanation
- Problem Analysis and Definitions
We are given the financial data for an individual: a gross income of \$23,670, adjustments of \$0, an exemption of \$12,400, and deductions of \$0. The objective is to calculate the Adjusted Gross Income (AGI) and the taxable income using the standard definitions: AGI is the gross income minus adjustments, and taxable income is the AGI minus exemptions and deductions.
- Calculating Adjusted Gross Income (AGI)
To find the AGI, we subtract the adjustments from the gross income. Given that the gross income is \$23,670 and the adjustments are \$0, we have:
\[\text{AGI} = \$23,670 - \$0 = \$23,670.\]
- Calculating Taxable Income
Now, we calculate the taxable income by subtracting the total exemptions and deductions from the AGI calculated in the previous step. With an AGI of \$23,670, an exemption of \$12,400, and a deduction of \$0, the calculation is:
\[\text{Taxable Income} = \$23,670 - \$12,400 - \$0 = \$11,270.\]
- Conclusion
Comparing our results with the provided options, we found the AGI to be \$23,670 and the taxable income to be \$11,270. This corresponds to the second choice. Therefore, the final result is \$23,670 and \$11,270.
Examples
Understanding how to calculate your AGI and taxable income is essential for personal financial management, particularly during tax season. By identifying your gross income and subtracting appropriate adjustments, exemptions, and deductions, you can estimate your tax liability accurately. This skill helps you plan your savings and understand how different financial factors affect the amount of tax you owe to the government.