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5. Karin and Chad (ages 30 and 31, respectively) are married and together have $110,000 of...

5. Karin and Chad (ages 30 and 31, respectively) are married and together have $110,000 of AGI. This year they have recorded the following expenses: Home mortgage interest (acquisition debt of $300,000) $16,640 Real estate taxes 5,400 State income taxes paid 6,300 Medical expenses (unreimbursed) 1,800 Employee business expenses (unreimbursed) 450 Charitable contributions (cash to their church) 760 Karin and Chad will file married jointly. Calculate their taxable income. Please show all workings.

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Answer #1

Karin and Chad will choose to itemize the deductions. The medical expenses and employee business expenses will not generate any addition for the itemized deductions because they are subject to 10% or 2% respectively.

taxable income is as follows,

( In $ )

110000-16640-5400-6300-760= 80900

80900-(4050*2)= $72,800

(Gross income minus mortgage interest minus real estate taxes minus income taxes paid minus charitable contributions minus standard deductions)

Taxable income is $72,800

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