Question

For AGI Deductions Vs. From AGI Deductions (LO. 6) Reba's 2018 income tax calculation is as follows: Gross income $120,000 Deductions for adjusted gross income (3,000) Adjusted gross income $117,000 Deductions from adjusted gross income: Standard deduction (12,000) (Total itemized deductions are $2,300) Taxable income $105,000 Before filing her return, Reba finds an $8,000 deduction that she omitted from these calculations. Although the item is clearly deductible, she is unsure whether she should deduct it for or from adjusted gross income. Reba doesn't think it matters where she deducts the item, because her taxable income will decrease by $8,000 regardless of how the item is deducted. (Hint: The standard deduction for filing single is $12,000.) Round calculations to the nearest dollar. Calculate her taxable income both ways: Deduction For AGI Deduction From AGI Gross income Deductions For AGI Adjusted gross income Deduction From AGI Greater of: $ Standard deduction Itemized deductions Taxable income

Answer 1

H Deduction For AGI Deduction From AGI $ 1,20,000.00 $ Gross Income 1,20,000.00 Deductions For AGI Adjusted Gross Income Deduction from AGI -11,000.00 $ $ -3,000.00 1,09,000.00 $ 1,17,000.00 Greater of: $12,000.00 $ -12,000.00 $ Standard Deduction -12,000.00 $10,300.00 Itemized Deduction 97,000.00 $ Taxable Income 1,05,000.00