Chance and Lindsay, both 37, are married and file a joint return in 2017. Their

Question

Chance and Lindsay, both 37, are married and file a joint return in 2017. Their AGI is $580,000. They report $39,000 of itemized deductions, consisting of the following amounts.

Home mortgage interest $25,000 Charitable contributions 14,000 Given that the couple's AGI exceeds the applicable amount ($313,800 in 2017), their itemized deductions are subject to a potential 396/80% cutback. a. What is the amount of Chance and Lindsay's itemized deductions for regular tax purposes for 2017? b. What is the couple's AMT adjustment for itemized deductions and/or the cutback in 2017?

Explanation / Answer

Answer for question no,a:

Chance and Lindsay's itemized deductions for regular tax purposes for 2017 is $25,000+$14000

=$39,000.

Answer for question no.b:

Income exceeding $313,800 =$580,000 -$313,800

=$266,200.

3% of $266,200 =$7,986.

80% of the itemized deduction is 80%*(25000+14000)=39000*80%

=$31,200.

Lower of the two needs to be considered for cut back i.e., $7,986..

Therefore itemized deduction would be $39,000 -$7,986.

=$31,014.

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