Question

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?

Answer 1

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

$Standard deduction = 11,400$

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

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

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  

$Gross income = 76,850 - 350 = 76,500$$

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

Adjusted gross income = Gross income - For AGI deductions

$Adjusted gross income = 76,500 - 4,000 = 72,500$

Total deductions from AGI  = $22,350.

Taxable income = Adjusted gross income + Total deductions from AGI

$Taxable income = 72,500 + 22,350 = 50,150$$

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

Learn more

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Answer details

Grade:    8

Subject:  business

Chapter:  tax accounting

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

Answer 2

The total amount of deductions Marc and Michelle are going to get is $24750.  

The taxable income of Marc and Michelle is $47750.

Further Explanation:  

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.

Learn More:  

1.      Learn more about the tax on the profit from selling the fixed assets  

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2.      Learn more about the personal tax  

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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.