Question

In 2016, Joan is single and a homeowner who incurs property taxes on her home of...

In 2016, Joan is single and a homeowner who incurs property taxes on her home of $2,000, makes charitable contributions of $500 and pays mortgage interest of $6,000. Joan’s adjusted gross income is $32,000. What is her taxable income?

  1. $19,450
  2. $23,500
  3. $32,000
  4. $25,700

Please do not copy from Chegg. I need an original answer with a proper explanation with step by step explanation.

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Answer #1

= d) 25700

   Taxpayers select the greater of their total itemized deductions or the standard deduction which reduces the amount of income subject to tax. Since Joan rented her apartment and didn't incur mortgage interest then her standard deduction would be higher than the total itemized deductions. The 2016 standard deduction for single taxpayers was $6,300. Joan's itemized deductions would only include her charitable contributions since she did not own a home.

Adjusted gross income - Standard deduction

        $32,000 - $6,300 = $25,700

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