Required information [The following information applies to the questions display

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Required information [The following information applies to the questions displayed below.] Camille Sikorski was divorced last year. She currently provides a home for her 15-year-old daughter Kaly. Kaly lived in Camille’s home for the entire year, and Camille paid for all the costs of maintaining the home. She received a salary of $92,500 and contributed $5,700 of it to a qualified retirement account (a for AGI deduction). She also received $13,500 of alimony from her former husband. Finally, Camille paid $16,800 of expenditures that qualified as itemized deductions. b. What would Camille’s taxable income be if she incurred $12,050 of itemized deductions instead of $16,800?

Explanation / Answer

The calculations have been made for the year 2017 as 2018 is still not completed.

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The value of Camille's taxable income is arrived as below:

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Notes:

1) Gross income includes the amount of alimony received.

2) In the given case, the standard deduction applicable to Camille would be $9,350 (for the year 2017) as she will be treated as the head of household. Since, this amount of standard deduction is less than the value of itemized deductions, Camille will claim the amount of itemized deductions (which is $12,050) as the deduction from her AGI.

3) Kaly is a qualifying child for claiming dependancy exemption (as per the applicable IRS rules) as she is below 19 years, has lived with her mother for more than half year (during the previous year) and has not provided any support to her mother (during the previous year). The amount of personal exemption for self is $4,050 and dependancy exemption for each qualifying child is $4,050 for the year 2017.

Gross Income (92,500 + 5,700) 98,200 Less AGI Deductions 5,700 Adjusted Gross Income 92,500 Less Itemized Deductions (as the value of Itemized Deductions is Greater than Standard Deduction) 12,050 Personal and Dependancy Exemptions (1*4,050 + 1*4,050) 8,100 Total Deductions (12,050 + 8,100) 20,150 Taxable Income $72,350

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