Question

ou have a gross income of $117,151 and are filing your tax return singly. You claim one exemption and can take a deduction of $2,713 for interest on your mortgage, an adjustment of $2,791 for business losses, an adjustment of $1,346 for alimony, a deduction of $2,086 for property taxes, a deduction of $2,376 for contributions to charity, and an adjustment of $1,091 for contributions to your retirement fund. The standard deduction for a single filer is $5,700, and exemptions are each worth $3,650. What is the difference between your adjusted gross income and your taxable income?
a.
$16,053
b.
$9,350
c.
$10,825
d.
$14,475

Answer 1

First compute adjustments to get AGI:
Adjustments = 2,791 + 1,346 + 1,091 = 5,228
AGI = 117,151 − 5,228 = 111,923

Itemized deductions = 2,713 + 2,086 + 2,376 = 7,175 (greater than the $5,700 standard deduction), plus one exemption = 3,650.

Difference between AGI and taxable income = itemized deductions + exemption = 7,175 + 3,650 = 10,825

Answer: c. $10,825