Question

Mr. and Mrs. Weiss had the following income items:

Mr. Weiss's salary: 105,000

Mrs. Weiss earnings from self-employment: 50,000

The income tax deduction for Mrs. Weiss's SE tax was $3,532. Mr. Weiss contributed to the maximum to his Section 401(K) plan, and Mrs. Weiss contributed to the maximum Keogh profit-sharing plan. Both spouses contributed $2,750 to their IRAs. Compute their AGI.

*Please note, the new tax bill applies to this AGI I believe.

I thought the AGI was: 155,000 - [18,500 + 3,532 + 11,000 + 2,750 + 2,750] = $116,468

Thank you!

Answer 1

Solution:-

Particulars	Amount
Mrs. Weiss earnings from self-employment	$50,000
Mrs. Weiss's SE tax	$3,532
Adjusted Net SE income	= 50,000 - 3,532 = $46,468
Maximum retirement plan contribution	= 46,468 * 20% = $9,293.6
Mrs. Weiss taxable earnings from self employment	= 46,468 - 9,293.6 = $37,174.4
Mr. Weiss's salary	$105,000
Contribution to 401(k) plan	$18,500
Taxable salary	105,000 - 18,500 = $86,500
AGI	= 86,500 + 37,174.4 = $123,674.4

Note :-

Contribution limit for 2017 is $18,000 per year; it rises to $18,500 in 2018. that's why we taken contribution limit $18,500.