Question

For 2016, the personal exemption amount is $4,050. The 2016 standard deduction is $6,300 for unmarried taxpayers or married taxpayers filing separately, $12,600 for married taxpayers filing jointly, and $9,300 for taxpayers filing as head of household.

Calculating Austin and Joseph’s Taxable Income

Austin and Joseph are a married couple filing jointly. Calculate Austin and Joseph’s 2016 taxable income by filling in the worksheet. Enter adjustments, deductions, and exemptions as negative numbers. If your answer is zero, enter "0".

• Austin and Joseph will earn $80,965 in wages this year.

• Joseph contributed $3,000 to an IRA.

• They itemize deductions.

• They paid mortgage interest of $8,600.

• Their state and local taxes were $2,560.

• They are entitled to two exemptions.

• They donated $1,500 to charity.

Gross income
Less: Adjustments to income
Adjusted gross income
Less: Deductions
Subtotal
Less: Exemptions
Taxable income

Answer 1

Particulars	Amount	Amount
Gross income (wages)		$ 80,965
Less: adjustments to income (IRA)		$   (3,000)
Adjusted gross income		$ 77,965
Less: deductions
Higher of
(1) itemized deductions:
Mortgage interest	$   (8,600)
State and local taxes	$   (2,560)
Charity	$   (1,500)
(1) itemized deductions	$(12,660)
(2) Standard deduction	$(12,600)
Higher of (1) and (2)		$(12,660)
Sub total		$ 65,305
Less: exemptions ($4,050 X 2)		$   (8,100)
Taxable income		$ 57,205

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