Question

Jim files single and has three dependent children.

Calculate his deductible; total personal and dependency exemptions under the following independent conditions:

a. Jim has AGI of $150,000. Amount of deductible total personal and dependency exemption.

b. Jim has AGI of $303,000. Amount of deductible total personal and dependency exemption.

c. Jim has AGI of $450,000. Amount of deductible total personal and dependency exemption.

Answer 1

Answer :

Depedency exemptions :

The amount that a taxpayer claims for a qualifying child is referred to as dependency exemptions. In 2013 a taxpayer is allowed to deduct $3,3\900 for each dependent

Phase out exemptions :

The exemption amount that the taxpayer is forbidden to deduct is referred to as phased out exemptions.

(a). Calculation person J's deductible total personal and dependency exemptions if person J has an AGI of $150,000

(Personal and dependent exemptions for person J) = ((standard deduction +(standard deduction* number of dependent))

= $3,900 + ($3,900*3)

= $3,900 + $11,700

=$15,600

Therefore, the personal and dependent exemptions for person J is $15,600

Explanation :

Person J's AGI $150,000 and the exemption phase-out threshold for single taxpayers is $250,000

Person J's AGI ($150,000) is below the exemption phase-out threshold ($250,000). Thus he can deduct $15,600 of personal and dependent exemptions

Note : Deduction is for person J and his three children

(b). Calculate person J's deduction total personal and dependency exemptions if person J has an AGI of $303,000

Steps	Explanation	Amount
Step 1	Deduct the J's AGI ($303,000(from the threshold AGI ($250,000)	$53,000 ($303,000 - $250,000)
Step 2	Divide the excess AGI ($53,000) by 2,500 and round the result to the next whole number	22($53,000/$2,500)
Step 3	Multiply the result fo step 2 by 2% but it should be less than 100%	44%(2%*22)
Ste 4	Multiply the result of step 3 by total personal and dependency exemptiions $15,600. The result would be the phased out amount	$6,864 ($15,600*44%)
Step 5	Deduct the result of step 4 from total personal and dependency exemptions $15,600. This would be a deductible exemption	$8,736 ($15,600 - $6,864)

Thus, Person J can deduct $8,736 of personal and dependent exemptions.

(c). Calcualate Person J 's deductible total personal and dependency exemptions if person J has an AGI $450,0000

Person J's AGI ($450,000) execeeds the point at which exemptions are completely phased - out ($372,501) for single taxpayers. Thus, he can not deduct any personal or dependency exemption.