Question

Jeremy and Alyssa Johnson have been married for five years and do not have any children. Jeremy was married previously and has one child from the prior marriage. He is self-employed and operates his own computer repair store. For the first two months of the year, Alyssa worked for Office Depot as an employee. In March, Alyssa accepted a new job with Super Toys Inc. (ST), where she worked for the remainder of the year. This year, the Johnsons received $264,000 of gross income.

a. Expenses associated with Jeremy’s store include $42,250 in salary (and employment taxes) to employees, $47,700 of supplies, and $18,900 in rent and other administrative expenses.

b. As a salesperson, Alyssa incurred $2,090 in travel expenses related to her employment that were not reimbursed by her employer.

c. The Johnsons own a piece of raw land held as an investment. They paid $590 of real property taxes on the property and they incurred $245 of expenses in travel costs to see the property and to evaluate other similar potential investment properties.

d. The Johnsons own a rental home. They incurred $8,590 of expenses associated with the property.

e. Jeremy paid $4,590 for health insurance coverage for himself (not through an exchange). Alyssa was covered by health plans provided by her employer, but Jeremy is not eligible for the plan until next year.

f. Jeremy paid $2,590 in self-employment taxes ($1,295 represents the employer portion of the self-employment taxes).

g. Jeremy paid $5,180 in alimony and $3,135 in child support from his prior marriage (divorced in 2010).

h. The Johnsons donated $2,090 to their favorite charity.

Determine the Johnson's AGI given the above information:

Johnson's AGI=?

Answer 1

Johnson’s AGI = $135495

Johnson’s AGI

Description	amount	explanation
Gross income	264000
a Ordinary and necessary business expenses	108850	Ordinary expenses associated with Jeremy’s busines (42250+47700+18900)
b Unreimbursed employment expenses	-	Unreimbursed employee business expenses are deductible from AGI not for AGI
c Real property taxes and investment expenses.	-	Taxes and investment expenses are deductible from AGI not for AGI
d Rental expenses	8590	Rental expenses are deductible for AGI even though they are technically investment or “production of income expenses.”
e Self-employed health insurance	4590	Jeremy may deduct all the costs of his health insurance because he is not eligible for ST’s health plan
f Self- employment taxes	1295	½ of self-employment taxes allowed as for AGI deduction
g Alimony	5180	Alimony is allowed for AGI deductions
h Donations	-	Charitable contributions are from not for AGI deductions
Total for AGI deductions	128505
AGI	135495