Daniel, age 38, is single and has the following income and expenses in 2017: Dan

Question

Daniel, age 38, is single and has the following income and expenses in 2017:

Daniel's standard deduction for 2017 is $6,350 and his personal exemption is $4,050.

a. Classify the following expenses as either "Deductible for AGI", "Deductible from AGI", or "Not deductible".

b. Daniel's gross income is $ and his AGI income is $.

c. Calculate Daniel's total itemized deductions (after any limitations).
$

Salary income $123,000 Net rent income 7,500 Dividend income 700 Payment of alimony 22,000 Mortgage interest on residence 7,000 Property tax on residence 600 Contribution to traditional IRA (assume the amount is fully deductible) 4,800 Contribution to United Church 1,100 Loss on the sale of real estate (held for investment) 450 Medical expenses 5,650 State income tax 1,050 Federal income tax 8,000

Explanation / Answer

Part 1)

The items have been classified as below:

_____

Part 2)

Daniel's gross income and AGI is determined as below:

_____

Part 3)

The value of Daniel's total itemized deductions is calculated as follows:

____

Notes:

As per the rules of IRS, for the year 2017, medical expenses in excess of 7.5% of adjusted gross income can be claimed as itemized deduction. In the given case, the medical expenses of $5,650 are less than $7,796.25 (103,950*7.5%). Therefore, the amount of medical expenses that can be itemized would be 0.

Payment of alimony Deductible for AGI Mortgage interest on residence Deductible from AGI Property tax on residence Deductible from AGI Contribution to traditional IRA (assume the amount is fully deductible) Deductible for AGI Contribution to United Church Deductible from AGI Loss on the sale of real estate (held for investment) Deductible for AGI Medical expenses Deductible from AGI State income tax Deductible from AGI Federal income tax Not Deductible

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