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Chandler and Monica file their taxes Married Filing Jointly Each earns $52,000 after employee deductions (Box...

Chandler and Monica file their taxes Married Filing Jointly
Each earns $52,000 after employee deductions (Box 1 income is $52,000 each)
They earn bank interest of $1,000 in their joint account.
​
Each contributes $6,000 to a Roth IRA
Monica adds $2,000 to her HSA account each year. Chandler does not have an HSA option.   

The maximum allowed Monica can contribute is $7,000.

Total of itemized deductions is $18,000.

Their standard deduction is $24,400.
​
​
They have no income adjustments
​
What is their Adjusted Gross Income?

What is their Taxable Income?

What are some things they could they do to reduce their taxes for this year?
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Answer #1

Adjusted Gross Income = $52000 (Chandler) + $52000 (Monica) + $1000 (Bank Interest)

=$105000

Taxable Income = Adjusted Gross Income - Deductions

= $105000 - $2000 (Contri to HSA by Monica) - $24400 (Standard Deduction)

= $78600

Notes: Monica can increase its contribution to her HSA account in order to get higher amount of deductions as the maximum that she can contribute is $6000.

Chandler should be started contributing to his HSA account as its 100% tax deductible.

Contribution to Roth IRA is non tax deductible.

Chandler and Monica can take higher of benefit of deductions i.e. Itemized deduction or standard deduction.

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