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.

NOTE: The answer to part A is NOT $39,000... and the answer to part B is NOT $31,014.

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

1 Note: since home mortgage interest and charitable contribution both are cutback adjustment so itemized deduction would be determined as follows: Taxpayers subject to the limitation must reduce itemized deductions by the lesser of: 3 percent of the amount by which AGI exceeds $313,800 80 percent of itemized deductions that are affected by the limit. So, 3% *(580,000 - 313,800) = 7,986 80% * (25000+14000) = 31200 So cutback adjustments will be 7986 for 2017 regular tax Itemized deduction allowed (39000-7986) = 31014 Ans part 1 2 Cutback doesn’t apply to AMT adjustment so a negative adjustment of (31014 Regular - 39000 AMT) = 7986 is made Ans part 2 is $7,986 Note: I have tried my best for correct solution, still find any difficulty please ask in comment, and I hope a positive feedback, thank you.

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