Question

Janice, age 32, earns $50,000 working in 2019. She has no other income. Her medical expenses for the year total $5,250. During the year, she suffers a casualty loss of $7,500 when her apartment is damaged by flood waters (part of a Federally declared disaster area). Janice contributes $10,000 to her church. On the advice of her friend, Janice is trying to decide whether to contribute $1,000 to a traditional IRA. Complete the table to show the effect the IRA contribution would have on Janice's itemized deductions.

With IRA Contribution Without IRA Contribution Gross income $ 50,000 $ 50,000 Contribution to IRA (1,000) 0 AGI $ 49,000 $ 50,000 Itemized deductions: Charitable contribution $ 10,000 $ 10,000 Medical expenses $ 350 $ 250 Casualty loss $ 2,500 $ 2,400 Total itemized deductions $ 12,850 $ 12,650 The $1,000 IRA contribution would increase Janice's itemized deductions by $ 200 . As a result, the $1,000 IRA contribution reduces her taxable income by $-_______ .

Answer 1

Janice Taxable income
Particulars	With IRA Contribution	Without IRA Contribution
	Amount($)	Amount($)
Gross Income	50000	50000
Less; Contribution to IRA	1000	0
Adjusted Gross Income	49000	50000
Itemised deductions:
Charitable contribution	10000	10000
Medical expenses	350	250	0.5
Casualty loss	2500	2400
Total Itemised deductions	12850	12650
Taxable Income	36150	37350
The taxable income with IRA contribution is $36150, without IRA contribution is $ 37350, the differecne amount of
$ 1200 decreases taxable income
Alternatively, simply we can say that $ 1000 deduction for contribution to IRA and $200 additional deductions in Itemised
deductions in total $ 1200
Answer:
As a result, the $ 1000 IRA contribution reduces her taxable income by $ 1200