Question

jesse brimhall is single. in 2022, his itemized deductions were $9,000 before considering any real property taxes he paid during the year. jesse's adjusted gross income was $70,000 (also before considering any property tax deductions). in 2022, he paid real property taxes of $3,000 on property 1 and $1,200 of real property taxes on property 2. he did not pay any other deductible taxes during the year. required: if property 1 is jesse's primary residence and property 2 is his vacation home (he does not rent it out at all), what is his taxable income after taking property taxes into account? if property 1 is jesse's business building (he owns the property) and property 2 is his primary residence, what is his taxable income after taking property taxes into account (ignore the deduction for qualified business income)? if property 1 is jesse's primary residence and property 2 is a parcel of land he holds for investment, what is his taxable income after taking property taxes into account?

Answer 1

Jesse Brimhall's taxable income after accounting for real property taxes deducted is $56,800, regardless of whether the second property is a vacation home, business building, or investment land as all these scenarios allow for full deduction of the property taxes paid.

Step-by-step explanation:

Jesse Brimhall can deduct real property taxes when itemizing deductions. The total property taxes paid for both properties amount to $4,200 ($3,000 + $1,200). When itemizing, we add this amount to Jesse's initial itemized deductions of $9,000 for a total of $13,200 in itemized deductions. This is then subtracted from his adjusted gross income (AGI) of $70,000 to find his taxable income.

Scenario 1: If property 1 is his primary residence and property 2 is his vacation home:

• Taxable income = $70,000 - $13,200 (itemized deductions)
• Taxable income = $56,800

Scenario 2: If property 1 is his business building and property 2 is his primary residence, Jesse may also deduct the property taxes:

• Taxable income = $70,000 - $13,200 (itemized deductions)
• Taxable income = $56,800

Scenario 3: If property 1 is his primary residence and property 2 is investment land, the property taxes are still fully deductible:

• Taxable income = $70,000 - $13,200 (itemized deductions)
• Taxable income = $56,800

In all scenarios, Jesse's taxable income after taking property taxes into account would be $56,800.