Question

Misti purchased a residence this year. Misti, age 32, is a single parent and lives with her 1-year-old daughter. This year, Misti received a salary of $160,000 and made the following payments:

State Sales Tax	$200
Home mortgage interest ($500,000 acquisition debt)	$15,000
Real estate taxes	1,525
State income taxes paid	1,340
Income tax preparation fee	2,250
Charitable contributions (cash to their church)	120

Misti files as a head of household. Calculate her taxable income this year.

Answer 1

Calculation for taxable income of Misti

Gross income [ Salaried income ]		$160,000
Less: Above the line deduction		Nil
Adjusted gross income		$160,000
Less: Itemized deduction or standard deduction which ever is higher
(A) Itemized deduction
(1) Real estate tax and either state sales tax or state income taxes which ever is higher [ $ 1,525 + $ 1,340 ( state income tax) ]	$2,865
(2) Home mortgage interest	$15,000
(3) Income tax preparation fees [ Eliminated as deduction from 2018 through 2025]	nil
(4) Contribution to church ( qualified charitable institutions)	$ 120
(A) Total itemized deduction	$17,985
(B) Standard deduction	$18,350
[ Standard deduction is higher than total itemized deduction , so standard deduction would be consider for deduction ]		$18,350
Taxable income of Misti		$141,650