Question

Misti purchased a residence this year. Misti, age 32, is a single parent and lives with...

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.

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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
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