Question

In 2017, Deon and NeNe are married filing jointly. They have three dependent children under 18 years of age. Deon and NeNe's AGI is 920,000, their taxable income is 854,000, and they itemize their deductions as follows: real property taxes of 17,700, state income taxes of 41,400, miscellaneous itemized deductions of 8,400 (subject to but in excess of 2 percent AGI floor), charitable contributions of 5,300, and mortgage interest expense of 48,400 (14,800 of which is attributable to a home-equity loan used to buy a new car). What is Deon and NeNe's AMT?

Answer 1

To estimate Deon and NeNe's AMT, certain itemized deductions they claimed must be added back to their taxable income, including state income taxes, real property taxes, miscellaneous deductions, and non-qualified mortgage interest.

Step-by-step explanation:

To calculate Deon and NeNe's Alternative Minimum Tax (AMT), we first need to identify the adjustments and preferences that apply to their situation. For the Alternative Minimum Tax calculation, certain itemized deductions are disallowed, such as state income taxes and property taxes, also known as 'tax preference items.' Furthermore, miscellaneous itemized deductions subject to the 2% AGI floor are not allowed for AMT purposes. Hence, from the itemized deductions provided, we must add back the state income taxes of $41,400, real property taxes of $17,700, and miscellaneous itemized deductions of $8,400 to their taxable income. However, charitable contributions and mortgage interest on debts to buy, build, or improve a home are deductible for AMT. The interest on the home-equity loan used to buy a new car, which amounts to $14,800, is not deductible for AMT purposes, so this amount should also be added back to the taxable income.

In summary, to compute the AMT, we'd take their taxable income of $854,000, add back the disallowed itemized deductions for AMT purposes ($41,400 + $17,700 + $8,400 + $14,800), and then apply the AMT tax rates per the relevant AMT tax brackets to determine the potential AMT liability. However, without knowing the exact AMT exemption amount and phase-out thresholds for 2017, as well as the AMT tax rates, the calculation cannot be completed in this response. Still, the process outlined here is essential in determining Deon and NeNe's AMT liability.

Answer 2

To calculate Deon and NeNe's AMT, we need to add back their itemized deductions to their taxable income, compare it to the exemption amount, and calculate their regular tax liability and AMT liability. However, the provided information is insufficient to determine the exact amount of their AMT.

Step-by-step explanation:

To calculate Deon and NeNe's Alternative Minimum Tax (AMT), we need to consider certain adjustments and add-backs to their taxable income. The AMT is a separate tax system that was created to ensure that high-income individuals pay a minimum amount of tax, regardless of deductions and credits. Popular deductions like state and local income taxes, certain itemized deductions, and personal exemptions are not allowed in calculating AMT.

In this case, Deon and NeNe's itemized deductions are subject to the AMT. To calculate their AMT, we need to add back the following itemized deductions to their taxable income:

• Real property taxes: $17,700
• State income taxes: $41,400
• Charitable contributions: $5,300
• Miscellaneous itemized deductions (subject to 2% AGI floor): $8,400
• Mortgage interest expense (attributable to a home-equity loan used to buy a new car): $0

Adding these deductions back to their taxable income, we get a total of $920,000 (AGI) + $73,800 (itemized deductions) = $993,800. Since their taxable income is already greater than the exemption amount for their filing status, which is $84,500 for 2017, we need to compare their regular tax liability and AMT liability. If their AMT liability is higher, they will owe taxes based on the AMT calculation.

However, since the provided information does not include their regular tax liability or the necessary calculations, we cannot determine the exact amount of Deon and NeNe's AMT without further information.