Answer
The income tax owed by the person is \[\$3,375\].
Work Step by Step
Adjusted gross profit can be computed by subtracting the adjustments from the gross profit. Compute the adjusted gross profit by substituting the values in the formula as mentioned below:
\[\begin{align}
& \text{Adjusted gross profit}=\text{Gross profit}-\text{Adjustments} \\
& =\$40,000-\$2500\\&=\$37,500\end{align}\]
Adjusted gross profit is further used to compute the taxable income by deducting the total of the exemptions and deductions.
\[\begin{align}
& \text{Taxable income}=\text{Adjusted gross profit}-\left( \text{Exemptions}+\text{Deductions} \right) \\
& =\$37,500-\left(\$3800+\$8300\right)\\&=\$25,400\end{align}\]
Taxable income is further used in order to compute the tax computation.
Tax computation can be done by multiplying the total of the taxable amount to their tax rates mentioned. Tax computation can be ascertained by substituting the values in the formula as mentioned below:
\[\begin{align}
& \text{Tax computation}=\text{Taxable amount }\!\!\times\!\!\text{ Tax rate} \\
& =\$8700\times0.10+\left(\$25,400-\$8700\right)\times15percent\\&=\$870+\left(\$16,700\times0.15\right)\\&=\$3375\end{align}\]
Tax computation is further used to compute the income tax by subtracting the tax credit from the tax computation.
\[\begin{align}
& \text{Income tax}=\text{Tax computation}-\text{Tax credit} \\
& =\$3375-\$0\\&=\$3375\end{align}\]
Hence, income tax owed by the single person is \[\$3375\].
