Question

Ken, a single taxpayer, has a gross income of $79,685. He claims one exemption and can take a deduction of $1,257 for medical expenses, a deduction of $2,181 for interest on his mortgage, an adjustment of $800 for alimony, a deduction of $1,419 for property taxes, an adjustment of $1,722 for business expenses, and an adjustment of $2,511 for contributions to his retirement fund. The standard deduction for a single filer is $5,700, and exemptions are worth $3,650 apiece. Using the table below, how much does Ken owe in income tax?
Between 65,900 and 65,950 dollars, for filing jointly, the tax is 9,169 dollars.
a.
$12,663
b.
$12,825
c.
$12,675
d.
$12,838

Answer 1

First compute AGI:
Gross income 79,685 − adjustments (800 + 1,722 + 2,511 = 5,033) = 74,652.

Deductions and exemption:
Standard deduction (5,700) is larger than itemized (1,257 + 2,181 + 1,419 = 4,857), so use standard.
Exemption = 3,650.

Taxable income = 74,652 − 5,700 − 3,650 = 65,302.

Using the tax table for taxable income $65,302 gives a tax of $12,663.

Answer: a. $12,663