Question

Jennifer and Jamar are married and live in a home with their 13-year-old dependent son, Oscar. This year, they had the following tax information. Jamar’s salary $ 60,000 Jennifer’s Qualified Business Income from sole proprietorship 95,000 Dividend income 2,800 Deduction for self-employment tax 6,712 Itemized deductions 19,200 Compute adjusted gross income (AGI) and taxable income.
a. AGI $151,088; taxable income $89,430.
b. AGI $157,800; taxable income $114,000.
c. AGI $157,800; taxable income $133,000.
d. AGI $151,088; taxable income $108,630.

Answer 1

Answer:

d. AGI $151,088; taxable income $108,630.

Explanation:

First we need to calculate Gross Income

Gross Income = Salary Income + Business Income + Dividend Income

Gross Income = $60,000 + $95,000 + $2,800

Gross Income = $157,800

Now Calculate adjusted gross income

Adjusted Gross Income = Gross Income - Self Employment Tax

Adjusted Gross Income = $157,800 - $6,712

Adjusted Gross Income = $151,088

Deduction will be as follow

Higher of

Itemized Deduction = $19,200

Standard deduction = $24,400

So, Standard deduction will be made because it is higher

QBI deduction = $95,000 x 20% = $19,000

Taxable Income = Adjusted Gross Income - Standard Deduction - QBI deduction  

Taxable Income = $151,088 - $24,400 - $19,000

Taxable Income = $107,688