Question

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1:7-38 Deduction of Taxes. Joyce is a single, cash-method taxpayer. On April 11, 2017, Joyce paid $120 in state income taxes with her 2016 state income tax return. During 2017, Joyce had $1,600 in state income taxes withheld. On April 13, 2018, Joyce paid $200 with her 2017 state tax return. During 2018, she had $2,100 in state income taxes with- held from her paycheck. Upon filing her 2018 tax return on April 15, 2019, she received a refund of $450 for excess state income taxes withheld. Joyce had total AGI in 2018 and 2019 of $51,000 and $53,500, respectively. In 2018, Joyce also paid $10,500 in qualified residence interest. a. What is the amount of state income taxes Joyce may include as an itemized deduction for 2017? b. What is Joyce's allowed itemized deduction for state income taxes for 2018? c. What is Joyce's taxable income for 2018?

Answer 1

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Given That with her 2016 state income tax return, in state income taxes paid by Joyce ==> $120 During 2017, in state income taxes withheld she had ==> $1600 with her 2017 tax returnJoyce paid==> $200 In 2018, The state income taxes withheld from her paycheck is ==> $2100 Question A ==>income taxes with her 2016 tax return+During 2017, Income taxes withheld ==>120+1600 ==>1720 ==> $1720 is the amount of state income taxes Joyce may include as a deduction for 2017. Question B ==>Income tax paid with 2017 return+during the year 2018, Income taxes withheld ==>200 + 2100 ==>2300 ==>$2300 is Joyces's allowed itemized deduction for state taxes for 2018.

Question C Joyce's Taxable income for 2018 So let's find the higher of AGI and higher of standard or itemized deduction AGI ==>Higher of AGI in 2018 or in 2019+Refund of excess tax withheld So, we get that Higher of AGI in year 2018 or in year 2019 ==> (Higher of 51000 or in 53500) ==> $53950 Then We get, AGI ==> 53500+450==>53950 Now, will go for higher of Standard or itemized deduction Higher of (Standard or itemized deduction)==> 12,000 is higher than 10,500 Then we take the higher one Standard deduction ==>12000

So finally, Joyce's Taxable income for 2018 is ==>AGI-Standard deduction ==>53950-12000 ==>41950 ==>Joyce's Taxable income for 2018 is $41950.