Question

Prepare a 2-3 page paper answering the following case:

Rank the following three single taxpayers in order of magnitude of taxable income (from lowest to highest) and explain your results.

Alice: Gross income = $80,000
            Deductions for AGI = $8,000
            Itemized deductions = 0

Brian: Gross income = $80,000
            Deductions for AGI = $4,000
            Itemized deductions = $4,000

Craig: Gross income = $80,000
            Deductions for AGI = $0
            Itemized deductions = $8,000

In your paper, consider the differences between the standard deduction vs. itemized deduction given the filing status. In addition, compare and contrast deductions for AGI and deductions from AGI (itemized deductions).

Answer 1

Computation of Taxable Income for the Year 2018

Description	Alice	Brian	Craig	Computation
(1) Gross Income	$80,000	$80,000	$80,000
(2) For AGI deductions	(8,000)	(4,000)	0
(3) Adjusted Gross Income	$72,000	$76,000	$80,000	(1)+(2)
(4) Standard Deduction	(12,000)	(12,0000	(12,000)	Single Taxpayer
(5) Itemized Deduction	0	(4,000)	(8,000)
(6) Greater of Standard deduction or Itemized Deduction	(12,000)	(12,000)	(12,000)
(7) Personal and Dependency Exemptions	0	0	0	The TCJA suspends personal exemptions for 2018 through 2025
(8) Taxable Income	$60,000	$64,000	$68,000	(3)+(6)+(7)