Marc and Michelle are married and earned salaries this year of $64,000 and $12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Marc and Michelle also paid $2,500 of qualifying moving expenses, and Marc paid alimony to a prior spouse in the amount of $1,500. Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $1,000 child tax credit for Matthew. Marc and Michelle paid $6,000 of expenditures that qualify as itemized deductions and they had a total of $5,500 in federal income taxes withheld from their paychecks during the course of the year. (use the 2016 tax rate schedules. )

What is the total amount of Marc and Michelle’s deductions from AGI?

What is Marc and Michelle’s taxable income?

What is Marc and Michelle’s taxable income?

Income Tax: It is the additional charge on an individual’s income which he/she needs to pay to the government. The taxable income is calculated by adding all the incomes and deducting all the deductions which an individual can claim on his/her income.

Compute the total amount of deductions available for Marc and Michelle:

Total Deduction Available

= Higher of Standard Deduction for MJF and Itemized Deduction + Personal and Dependency Exemptions

= Higher of $12600 and $6000 + $12150 ($4050×3)

= $12600 + $12150

=$24750.

Therefore, the total deductions available to Marc and Michelle are $24750.

Gross Income of Marc and Michelle

= Salary of Marc + Salary of Michelle + Interest Earned on Corporate Bonds

= $64000 + $12000 + 500

= $76500.

Total Taxable Income of Marc and Michelle

= Gross Income – Qualified Moving Expenses – Alimony Paid – Total Deductions

= $76500 - $2500 - $1500 - $24750

= $47750.

Therefore, the total taxable income of Marc and Michelle is $47750.

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Answer details:

Grade: Senior School

Subject: Taxation

Chapter: Income Tax

Keywords: Taxable income, Marc and Michelle, Deductions, salary income, earned, corporate bond interest, interest on municipal bond, standard deductions, US tax brackets.

tifanihayyu tifanihayyu · Answer 2 · 2019-10-14T21:44:39+02:00

The total amount of Marc and Michelle’s deductions from AGI is $22,350. Whereas Marc and Michelle’s taxable income is $50,150

Further explanation

The total amount of Marc and Michelle’s deductions from AGI?

Standard deduction is come from Married filing jointly, so

[tex]Standard deduction = 11,400[/tex]

Itemized deductions is 6,000

The total amount of Marc and Michelle’s deductions from AGI = Greater of standard deductions or itemized deductions + Personal and dependency exemptions

[tex]The total amount of Marc and Michelle’s deductions from AGI = 11,400 + 10,950=22,350[/tex]

Therefore the total amount of Marc and Michelle’s deductions from AGI is $22,350.

Marc and Michelle’s taxable income?

Realized income from all sources = 64,000 salary + 12,000 salary + 350 municipal bond interest + 500 corporate bond interest = $76,850

Excluded or deferred income = Nontaxable municipal bond interest = 350

Gross income = Realized income from all sources - Excluded or deferred income

[tex]Gross income = 76,850 - 350 = 76,500[/tex]$

For AGI deductions = 2,500 qualified moving expenses + 1,500 alimony paid = 4,000

Adjusted gross income = Gross income - For AGI deductions

[tex]Adjusted gross income = 76,500 - 4,000 = 72,500[/tex]

Total deductions from AGI = $22,350.

Taxable income = Adjusted gross income + Total deductions from AGI

[tex]Taxable income = 72,500 + 22,350 = 50,150[/tex]$

Therefore Marc and Michelle’s taxable income is $50,150

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Answer details

Grade: 8

Subject: business

Chapter: tax accounting

Keywords: deductions, taxable income, tax, amount, paychecks