Question

# Through November, Cameron has received gross income of \$70,000. For December, Cameron is considering whether to...

Through November, Cameron has received gross income of \$70,000. For December, Cameron is considering whether to accept one more work engagements for the year. Engagement 1 will generate \$8,820 of revenue at a cost to Cameron of \$3,900, which is deductible for AGI. In contrast, engagement 2 will generate \$7,250 of qualified business income (QBI) which is eligible for the 20% QBI deduction. Cameron files as a single taxpayer. Calculate Cameron’s taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has no itemized deductions.

 Particulars Engagement 1 Engagement 2 Gross income before new work engagement \$70,000 \$70,000 Income from engagement \$8,820 \$7,250 Additional for AGI deduction \$3,900 = \$7,250 * [ 100% - 20% ] = \$5,800 Adjusted gross income = \$70,000 + \$8,820 - \$3,900 = \$74,920 =  \$70,000 + \$7,250 - \$5,800 = \$71,450 Standard deduction \$6,300 \$6,300 Personal exemption \$4,050 \$4,050 Taxable income = \$74,920 - \$6,300 - \$4,000 = \$64,570 = \$71,450 - \$6,300 - \$4,050 = \$61,100

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