Jason and Mary are married taxpayers in 2016. They are both under age 65 and in good health. For this tax year, they have a total of $41,000 in wages and $700 in interest income. Jason and Mary’s deductions for adjusted gross income amount to $5,000 and their itemized deductions equal $7,950. They claim two exemptions for the year on their joint tax return. a. What is the amount of Jason and Mary’s adjusted gross income? $___________ b. What is the amount of their itemized deductions or standard deduction? $______________ c. What is their 2016 taxable income? $________________
- What is the amount of Jason and Mary’s adjusted gross income?
Calculation of AGI:
Total Income = Wages + Interest
= $41,000 + $700
Total Income = $41,700
AGI = Total Income – Deduction for AGI
= $41,700 – $5,000
AGI = $36,700
Jason and Mary’s adjusted gross income = $36,700
- What is the amount of their itemized deductions or standard deduction?
Itemized Deduction = $7,950 or
Standard Deduction for 2016 = $12,600
Note: While the itemized deductions are $7,950, that’s less than their standard deduction of $12,600, so they should use the standard deduction.
- What is their 2016 taxable income?
Taxable Income = AGI – Itemized Deduction – Personal Exemption for 2016 (2 exemptions)
= $36,700 – $12,600 – $8,100 ($4,050 * 2)
Taxable Income = $16,000