To explain the difference between income and taxable income, let's carefully analyze the components given in the chart.
1. Income: This represents the total amount of money earned by a person before any deductions or taxes are applied. According to the chart, this amount is [tex]$\$[/tex]50,000[tex]$.
\[
\text{Income} = \$[/tex]50,000
\]
2. Deductions: These are the amounts subtracted from the total income for various permissible reasons such as expenses, allowances, and other applicable write-offs. They reduce the overall tax burden by lowering the taxable income. The given deduction amount is [tex]$-\$[/tex]8,950[tex]$.
\[
\text{Deductions} = -\$[/tex]8,950
\]
3. Taxable Income: This is the income amount on which taxes are calculated, after all allowable deductions. To find this, we subtract the deductions from the total income:
[tex]\[
\text{Taxable Income} = \text{Income} - \text{Deductions} \\
\text{Taxable Income} = \$50,000 - \$8,950 = \$41,050
\][/tex]
4. Taxes: This is the actual amount of money that needs to be paid to the government based on the taxable income. According to the chart, the calculated taxes owed based on the taxable income are [tex]$\$[/tex]7,090[tex]$.
\[
\text{Taxes} = \$[/tex]7,090
\]
5. Tax Credit: This is an amount that can directly reduce the amount of tax owed. A tax credit is subtracted from the calculated taxes. In this case, the given tax credit is [tex]$-\$[/tex]1,500[tex]$.
\[
\text{Tax Credit} = -\$[/tex]1,500
\]
6. Taxes Owed: This is the final amount of taxes that need to be paid after applying any tax credits to the taxes calculated based on taxable income. We subtract the tax credit from the initial tax amount:
[tex]\[
\text{Taxes Owed} = \text{Taxes} - \text{Tax Credit} \\
\text{Taxes Owed} = \$7,090 - \$1,500 = \$5,590
\][/tex]
After explaining the various elements, it's clear that:
- Income refers to the total earnings before any deductions.
- Taxable income is the remaining amount after subtracting all relevant deductions from the total income.
Therefore, the explanation that fits the given data and calculation is:
Income is what a person earns, while taxable income reflects deductions subtracted for relevant expenses.
