Question

Camille Sikorski was divorced in 2018. She currently provides a home for her 15-year-old daughter Kaly. Kaly lived in Camille’s home for the entire year, and Camille paid for all the costs of maintaining the home. Camille received a salary of $90,000 and contributed $5,600 of it to a qualified retirement account (a for AGI deduction). She also received $13,000 of alimony from her former husband (per divorce decree issued in 2018). Finally, Camille paid $16,700 of expenditures that qualified as itemized deductions. (Use the tax rate schedules and 2020 rules.)

a. What is Camille’s taxable income?

	Description		Amount
(1)	Gross income
(2)	For AGI deductions
(3)	Adjusted gross income		$0
(4)	Standard deduction
(5)	Itemized deductions
(6)
	Taxable income

b. What would Camille’s taxable income be if she incurred $32,500 of itemized deductions instead of $16,700?

	Description		Amount
(1)	Gross income
(2)	For AGI deductions
(3)	Adjusted gross income		$0
(4)	Standard deduction
(5)	Itemized deductions
(6)
	Taxable income

c. Assume the original facts but now suppose Camille’s daughter, Kaly, is 25 years old and a full-time student. Kaly’s gross income for the year was $6,700. Kaly provided $4,020 of her own support, and Camille provided $6,700 of support. What is Camille’s taxable income?

	Description		Amount
(1)	Gross income
(2)	For AGI deductions
(3)	Adjusted gross income		$0
(4)	Standard deduction
(5)	Itemized deductions
(6)
	Taxable income

Answer 1

Ans a) To calculate: Camille's taxable income

Description amount($)

1) Gross income 90000

2) For AGI deduction (5600)

3) Adjusted Gross Income 84400

4) Standard deductions ---------

5) Itemized deductions (16700)

6) Taxable Income 67700

Note : Standard deduction for single taxpayer for 2020 is $12400, which is less than the itemised deduction, So we deduct itemized deduction instead of standard deduction to reduce our taxable income.

Alimony is not considered as a taxable income

b) To calculate: Camille's taxable income if itemized deduction is $32500 instead of 16700

Description amount($)

1) Gross income 90000

2) For AGI deduction (5600)

3) Adjusted Gross Income 84400

4) Standard deductions ----------

5) Itemized deductions (32500)

6) Taxable Income 51900

Note : Standard deduction for single taxpayer for 2020 is $12400, which is less than the new itemized deduction of $32500. So, here too, we deduct the itemized deductions instead of standard deductions to reduce our taxable income.

Alimony is not considered as a taxable income

c) To calculate: Camille's taxable income when Camille’s daughter, Kaly, is 25 years old and a full-time student. Kaly’s gross income for the year was $6,700. Kaly provided $4,020 of her own support, and Camille provided $6,700 of support.

Description amount($)

1) Gross income 90000  

2) For AGI deduction (5600)

3) Adjusted Gross Income 84400

4) Standard deductions --------

5) Itemized deductions (16700)

6) Taxable Income 67700

Note: Kaly doe not qualify as a tax dependent now because she is over qualifying age of 23 years even though she is a full time student. So camille can't claim Tax dependent deductions if any.

Alimony is not considered as a taxable income