Question

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.

Answer 1

Answer :-

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

Note :-

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