Question

Rob, single, age 40, no dependents, earns a salary of $55,000 in 2020 andhas no adjustments....

Rob, single, age 40, no dependents, earns a salary of $55,000 in 2020 andhas no adjustments. Rob has no QBI/no QBI deduction.Rob had medical expenses of $16,500 (before the % of AGI floor limitation). This is Rob's only itemized deduction.What is Rob’s taxable income in 2020?

Rob, single, age 40, no dependents, earns a salary of $55,000 in 2020 andhas an adjustment (deductible IRA contribution) of $5,000. Rob has noQBI/no QBI deduction.Rob had medical expenses of $16,500 (before the % of AGI floor limitation). This is Rob's only itemized deduction.What is Rob’s taxable income in 2020?

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Answer #1

Computation of taxable income

Salary $ 55000

Less: contribution to IRA. $ (5000) (Note 1)

AGI. $ 50000

Less: Standard deduction. $(12750) (Note 2)

Taxable Income. $ 37250

Note 1

Contribution to traditional IRA is deductable upto $ 6000 or amount contributed, which ever is lower, if the age of the contributor is below 49.

Note 2

If we choose itamized deduction from the AGI, we can deduct only expenses worth more than 7.5% of the AGI (16500 - (50000*7.5%=12750). If we choose standards deduction, we can only deduct $12400 for persons age below 65.

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