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Daniel, age 38, is single and has the following income and expenses in 2020:
Salary income $165,000
Net rent income 12,500
Dividend income 2,900
Payment of alimony (divorce finalized in March 2019) 20,000
Mortgage interest on residence 8,300
Property tax on residence 3,400
Contribution to traditional IRA (assume the amount is fully deductible) 4,800
Contribution to United Church 1,700
Loss on the sale of real estate (held for investment) 575
Medical expenses 5,300
State income tax 1,500
Federal income tax 4,400
Daniel's standard deduction for 2019 is $12,200.
a. Classify the following expenses as either "Deductible for AGI", "Deductible from AGI", or "Not deductible
Payment of alimony
Mortgage interest on residence
Property tax on residence
Contribution to traditional IRA (assume the amount is fully deductible)
Contribution to United Church
Loss on the sale of real estate (held for investment)
Medical expenses
State income tax
Federal income tax
What is Daniel's gross income and his AGI?
Gross income:
$ AGI:
b. Should Daniel itemize his deductions from AGI or take the standard deduction?

Respuesta :

ayokenny2001

Answer:

See below

Explanation:

a. Classify the following expenses as either " Deductible for AGI " , " Deductible from AGI " , or " not deductible".

Particulars

•Payment of Alimony ----- Not deductible

•Mortgage interest on residence---Deductible from AGI

•Property tax on residence------Deductible from AGI

•Contribution to traditional IRA (assume the amount is fully Deductible)----Deductible for AGI

Contribution to United Church-------Deductible from AGI

Loss on the sale of real estate(held for investment)-------Deductible for AGI

Medical expenses------deductible from AGI

State income tax-----------deductible from AGI

Federal income tax-------Not deductible

What is Daniel's Gross income and his AGI

I. Gross income

Salary income + net rent income + dividend income

$165,000 + $12,500 + $2,900

$180,400

ii AGI

Gross income - (Contribution to traditional IRA + loss on sale of real estate)

$180,400 - ($4,800 + $575)

$175,025

b. Because Daniel's total itemized deductions (after any limitations) are $14,900 (Please see workings below), he would benefit from itemizing his deductions from AGI

•Workings

Mortgage interest on residence $8,300

Property tax on residence

$3,400

Contribution to United Church

$1,700

State income tax

$1,500

Medical expenses[Medical expenses that are allowed for tax deductions should not be more than 10% Adjusted gross income

$0

Total itemized deductions

$14,900

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