Question

48. Zed and Jaffry are married and file jointly every year. They have 3 children (ages 6, 10 and 17) who are dependents. They have a W-2 income of $92,000. They have $11,000 in Federal taxes withheld. Zed and Jaffry have the following expenses for the year: Interest on a home equity loan taken out in 2018 (loan issued for $100,000, used solely for college education) $1,900 Interest on first mortgage (original loan balance $450,000) $11,400 Property taxes on personal residence $8,600 State income tax $7,200 State sales tax $3,900 What is Zed and Jaffry’s taxable income?

Answer 1

Computation of joint Zed and Jaffry’s Income:

Particulars	$	Remarks
W-2 Income combined	92,000
Less : Deductions
Federal taxes withheld	-	It will not be deduct from taxable income, will allowed deduct from tax.
Interest on home equity loan	(1,900)	It will be allowed as deduction irrespective its use. And maximum allowed is $750,000 for joint filing persons.
Interest on first mortgage	(11,400)	It will be allowed as deduction. Deduct all the interest on the first mortgage under the grandfather rule for up to $1 million of home acquisition debt.
Property tax on personal residence	(8,600)	Individuals can deduct personal property taxes paid during the year with a maximum cap of $10,000.
State income tax	(7,200)	Taxpayers who itemize deductions on their federal income tax returns can deduct state and local real estate and personal property taxes, as well as either income taxes or general sales taxes. ... Initially, all state and local taxes not directly tied to a benefit were deductible against federal taxable income.
State sales tax	(3,900)	Taxpayers who itemize deductions on their federal income tax returns can deduct state and local real estate and personal property taxes, as well as either income taxes or general sales taxes. ... Initially, all state and local taxes not directly tied to a benefit were deductible against federal taxable income.
Taxable Income	59,000