Answer and Explanation:
a. What is the amount of their adjusted gross income?
Adjusted Gross Income ( AGI ) = $88,750 + $2,660 - $5,170
= $86,240
Adjusted Gross Income ( AGI ) = $86,240
b. In order to minimize taxable income, Diego and Dolores will in the amount of
From the above box, Here Diego, Dolores both are married so, Standard Deduction in 2017 is $12,700
In order to minimize taxable income, Diego and Dolores will in the amount of $12,700
c. What is the amount of their taxable income?
Taxable income = AGI - Standard deduction - exemptions
= $86,240 - 12,700 - [ 2 * $4,050 ]
= 73,540 - 8,100
= $65,440
Taxable income = $65,440
d. What is their tax liability for 2017?
from Tax bracket for married filling jointly in 2017 table.
Tax liability = [ 18,650 * 10% ] + [ 15% [ 65,440 - 18,650 ] ]
= 1,865 + [ 15% * 46,790 ]
= 1,865 + 7,018.5
= $8,883.5
Tax liability = $8,883.5
