For tax purposes, "gross income" is all the money a person receives in a given year from any source. But income taxes are levied on "taxable income" rather than gross income. The difference between the two is the result of many exemptions and deductions. To see how they work, suppose you made $$50,000$ last year in wages, earned $$10,000$ from investments, and were given $$5,000$ as a gift by your grandmother. Also assume that you are a single parent with one small child living with you. LO$18\mathrm{.}7$

a$.$ What is your gross income?

b$.$ Gifts of up to $$13,000$ per year from any person are not counted as taxable income. Also, the "personal exemption" allows you to reduce your taxable income by $$3,650$ for each member of your household. Given these exemptions, what is your taxable income?

c$.$ Next, assume you paid $$700$ in interser on your student loans last tear, put $$2000$ into a health saving account $($HSA$),$ and depisited $$4000$ into an individual retirement account $($IRA$).$ These expenditures are all atx exempt, meaning that any money spent on them reduces taxable income dollar$-$for$-$dollar. Knowing that fact, now what is your taxable income?

d$.$ Next, you can either take the so$-$called stantdard deduction or apply for itemized deduction $($ which invilve a lot of tedious paperwork$).$ You opt for the standard deduction that allows you as head of your household to exepmt another $$8,500$ from your taxable income. Taking that into account, what is your taxable income.

e$.$ Apply the tax rates shown in Table $18\mathrm{.}1$ to your taxable income. How much federal income tax will you owe? What is the marginal tax rate that applies to your last dollar of taxable income?

f$.$ As the parent of a dependent child, you qualify for the government's $$1,000$ per child "tax credit." Like all tax credits, this $$1,000$ credit "pays" for $$1,000$ of whatever amount of tax you owe. Given this credit, how much money will you actually have to oay in taxes? Using that actual amount, what is your average tax rate relative to your taxable income? What about your average tax rate relative to your gross income?