Question

Omer, single, age 35, has one dependent (Maria, a qualifying child, age 7) that lived with Omer for all of 2020. Omer paid all costs of maintaining the household for himself and Maria. Omer’s sister, Zelda, also lived with Omer for all of 2020. Zelda had no income, and Omer provided all of her support.

In 2020, Omer had the following income items:

• Salary: $75,000

• Interest on savings account (investment income): $2,500

• Ordinary dividends (investment income; not qualified dividends): $1,500

• Unemployment Compensation: $10,000

• Gift from Omer’s father: $10,000

• Alimony from ex-wife (divorce finalized in 2014): $10,000

  Omer paid the following expenses in 2020:

• Federal income taxes withheld on wages: $4,000

• State & local income taxes withheld on wages: $1,000

• Sales tax: $9,000

• Property tax: $3,000

• Medical expenses: $1,000

• Food and clothes for Maria: $4,000

• Investment interest: $5,000

• Food and clothes for himself: $5,000

• Childcare expenses so Omer can work: $2,000

• HSA Contribution (Omer has a HDHP): $2,000

• Charitable contribution (cash): $2,500

• Unreimbursed employee business expenses: $500

• Car payment: $6,000

• Mortgage interest on $300,000 mortgage used to purchase primary residence: $3,000  

  • QUESTION: What is Omer’s total itemized deductions?

  • QUESTION: What is Omer’s taxable income? Omer has no QBI deduction.

  • ​​​​​​​

Answer 1

Particulars	Amount
Salary	$       75,000
Interest	$         2,500
Ordinary dividends	$         1,500
Unemployment comensation	$       10,000
Alimony	$       10,000
Less: HSA contribution	$        (2,000)
AGI	$       97,000
Itemized deductions:	Amount	Amount
Medical expenses	$         1,000
Less: 7.5% of AGI	$        (7,275)	$                -
State income tax	$         1,000
Sales tax	$         9,000
Higher of both	$         9,000
Add: property tax	$         3,000
Total qualified taxes	$       12,000
Deductible taxes		$       10,000
Investment interest		$         4,000
Charity		$         2,500
Mortgage interest		$         3,000
Total itemized deduction		$       19,500
Particulars	Amount
AGI	$       97,000
Less: itemized deductions	$       19,500
Taxable income	$       77,500

Taxable income is $77,500.