B. J. and Carolyn Grace are full-time employees. B. J. is an elementary school t

Question

B. J. and Carolyn Grace are full-time employees. B. J. is an elementary school teacher, and Carolyn is a registered nurse at a hospital. During the year, they incur the following employment-related expenses:

School supplies for use in the classroom $1,400

Emergency room uniforms 800

Union dues (teachers association) 200

Job hunting expenses (Carolyn obtained another nursing position but decided not to change jobs) 1,300

Continuing education correspondence courses (required to maintain nursing license) 380

Professional dues and subscriptions 1,100

None of these expenses are reimbursed by the employers.

For the year, the Graces file a joint return reflecting salary income of $90,000. They also have gambling income of $6,000 and gambling losses of $7,000 (fully substantiated). They pay $400 to have their tax return prepared. They have other itemized deductions (i.e., interest on home mortgage, property taxes on personal residence, state income taxes, and charitable contributions) of $14,500.

Determine the couple's AGI. $
Determine the gross amount of miscellaneous itemized deductions subject to the 2%-of-AGI limitation. $
Determine the total amount of itemized deductions allowed. $

Explanation / Answer

Adjusted Gross Income -

Particulars                                                                                                                                Amount

Salary income                                                                                                                           $90000

(+) Gambling income                                                                                                                   $6000

          Gross Income                                                                                                                 $96000

(-) Itemized deductions allowed

Employment related expenses which are not reimbursed :

School supplies for use in the classroom                                                         $1400

Emergency room uniforms                                                                                         $800

Union dues (teachers association)                                                                              $200

Job hunting expenses                                                                                              $1300

Continuing education correspondence courses                                                            $380

Professional dues and subscription                                                                           $1100             $5180

Adjusted Gross Income                                                                                                            $90820      

(-) Limitation 2%                                                                                                                        $1816.4

                                                                                                                                               $89003.6

(-) Miscellaneous itemized deductions

Gambling losses                                                                                                    $7000

Expenses for preparing tax returns                                                                            $400

Other itemized deductions                                                                                     $14500         $21900   

Gross Income after miscellaneous deductions                                                                            $67103.6  

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