Question

Steve and Sue are married with three dependent children. Their 2017 joint income tax return shows $389,000 of AGI and $60,000 of itemized deductions made up of $30,000 of state income taxes and $30,000 of charitable contributions. Calculate the following amounts: In your computations, round any percentage up the nearest whole percent. If required, round your answers to the nearest dollar.

a. Allowable itemized or standard deduction amount $

b. Allowable exemptions deduction amount $

c. Taxable income $

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Janet and James purchased their personal residence 15 years ago for $300,000. For the current year, they have an $80,000 first mortgage on their home, on which they paid $5,750 in interest. They also have a home equity loan secured by their home with a balance throughout the year of $150,000. They paid interest on the home equity loan of $9,000 for the year.

Calculate the amount of their deduction for interest paid on qualified residence acquisition debt and qualified home equity debt for the current year.

Round any division to five decimal places. Round your final answers to the nearest dollar.

a.	Qualified residence acquisition debt interest	$
b.	Qualified home equity debt interest	$

Answer 1

Question 1

a. Allowable itemized or standard deduction amount = $57,330

=$60,000-3%($389,000-300,000)

which is less than 80%($60,000)

= 60000-2670

= 57330

b. Allowable exemptions deduction amount = $5,830 (5*1166)

5 exemptions at $1166 each calculated as:

($389000-300,000)/2,500=36 x 2% = 71.20% reduction

(100-71.20%)=28.80% * $4050 = $1166

c.Taxable income = $325840

$389000-57330-5830

Question 2

a. Qualified residence acquisition debt interest: $5,750

b. Qualified home equity debt interest: $6,000

(100,000/150,000)*9000 = 6000