Question

1) The Inouyes filed jointly in 2018. Their AGI is $78,000. They reported $2,000 of qualified business income and $22,000 of itemized deductions. They have two children, one of whom qualifies as their dependent as a qualifying child. The 2018 standard deduction amount for MFJ taxpayers is $24,000. What is the total amount of from AGI deductions they are allowed to claim on their 2018 tax return?

2) Jane and Ed Rochester are married with a two-year-old child who lives with them and whom they support financially. In 2018, Ed and Jane realized the following items of income and expense: Item Amount Ed's Salary $ 35,000 Jane's Salary 70,000 Municipal bond interest income 400 Qualified business income 1,000 Alimony paid (for AGI deduction) (7,000 ) Real property tax (from AGI deduction) (10,000 ) Charitable contributions (from AGI) (15,000 ) They also qualified for a $2,000 child tax credit. Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate). Finally, the 2018 standard deduction amount for MFJ taxpayers is $24,000. What is the couple's taxable income?

Answer 1

Answer 1

As from 2018 there is no personal and dependency exemption the total amount of from AGI deductions, it includes only the amount greater of standard deductions or itemized deductions.

Itemized deduction = 22000

Standard deduction = 24000

Standard deduction > itemized deduction

Therefore,

the total amount of from AGI deductions = 24000

Answer 2

(1)Ed's salary......................................... $35,000

(2)Jane's salary..................................... 70,000

(3)Municipal bond interest income........ 0

(4)Qualified business income............... 1000

(5)Gross income...................................... 106000

(5)Alimony paid........................ ............... (7,000)

(6)Adjusted gross income......................... 99000

(7)Standard deduction............................... (24000)

(8)Itemized deductions.............................. (25,000)

(9)Greater of (7) or (8)................................. (25000)

(10)Total deductions from AGI..................... (25000)

(11) Taxable income................................. ..... 74000

(12)Tax liability.................................................8499 (1905+(12%*(74000-19050))

(13)Tax credits................................................(2000)

(14) Tax withheld............................................(5800)

Tax due...............................................…........... 699

Taxable income = 74000