Final answer:
Diane's adjusted gross income (AGI) is calculated by starting with her salary of $178,300 and subtracting the deductible interest on qualified tuition ($8,150) and deductible alimony payments ($28,700), resulting in an AGI of $141,450.
Step-by-step explanation:
Adjusted gross income (AGI) is a key term in tax preparation, representing a taxpayer's income minus certain allowable deductions. In order to calculate Diane's AGI, we must start with her salary income and then subtract any of the allowed deductions that apply to her situation based on current tax law.
Diane has received a salary of $178,300 for the year. She paid $8,150 of interest on loans for qualified tuition costs for her daughter, which may be deductible subject to certain limitations. Diane has also paid $9,000 for moving expenses and $28,700 in alimony payments. As of the changes in tax law post-2017, moving expenses are no longer generally deductible for non-military taxpayers, and for divorces finalized after December 31, 2018, alimony is no longer deductible. However, since Diane's divorce was in 2012, her alimony payments remain deductible.
Therefore, to calculate Diane's AGI, you would subtract the deductible expenses from her salary:
- Salary: $178,300
- Deductible interest on qualified tuition: $8,150
- Deductible alimony payments: $28,700
AGI = Salary - Deductible Interest - Deductible Alimony
AGI = $178,300 - $8,150 - $28,700
AGI = $141,450
Diane's adjusted gross income would be $141,450.