Question

In 2017, Deon and NeNe are married filing jointly. They have three dependent children under 18 years of age. Deon and NeNe’s AGI is $813,800, their taxable income is $722,750, and they itemize their deductions as follows: real property taxes of $10,000, state income taxes of $40,000, miscellaneous itemized deductions of $4,000 (subject to but in excess of 2% AGI floor), charitable contributions of $11,050, and mortgage interest expense of $41,000 ($11,000 of which is attributable to a home-equity loan used to buy a new car). Use Tax Rate Schedule for reference.

Problem 8-65 Part a a. What is Deon and NeNe's AMT?

Answer 1

Calculaiton of Income for AMT.

Net Taxable Income - $722,750

Add :-

Property Taxes - 10,000

State Taxes - 40,000

Itemized deduction - 0 (As they exceed 2% of AGI)

Charitable Donation - 0 (As they are allowed deduction for AMT)

Morgage Interest Expense -41,000 ( Interest attributable to buy car is not allowed as a deduction)

Total AMT Income - 813,750

Since it is below the threshold of $1,000,000 for Joint filler exemption is $ 109,400, therefore taxable AMT - (813,750 - 109400) = 704350. Tax rate 28 % will apply =(704350*0.28) = $197,218.