Diego, age 28, married Dolores, age 27, in 2017. Their salaries for the year amounted to $88,750 and they had interest income of $2,660. Diego and Dolores' deductions for adjusted gross income amounted to $5,170; their itemized deductions were $8,425; they claimed two exemptions on their return; and, they filed a joint return.
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a. What is the amount of their adjusted gross
income?
$
b. In order to minimize taxable income, Diego and Dolores will in the amount of $.
c. What is the amount of their taxable
income?
$
d. What is their tax liability for 2017?
$
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Solution :-
a. What is the amount of their adjusted gross income?
Adjusted Gross Income ( AGI ) = $88,750 + $2,660 - $5,170
= $86,240
Adjusted Gross Income ( AGI ) = $86,240
b. In order to minimize taxable income, Diego and Dolores will in the amount of
From the above box, Here Diego, Dolores both are married so, Standard Deduction in 2017 is $12,700
c. What is the amount of their taxable income?
Taxable income = AGI - Standard deduction - exemptions
= $86,240 - 12,700 - [ 2 * $4,050 ]
= 73,540 - 8,100
= $65,440
Taxable income = $65,440
d. What is their tax liability for 2017?
Tax liability = [ 18,650 * 10% ] + [ 15% [ 65,440 - 18,650 ] ]
= 1,865 + [ 15% * 46,790 ]
= 1,865 + 7,018.5
= $8,883.5
Tax liability = $8,883.5
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