Question

Aaron and Michele, ages 40 and 41, respectively, are married and file a joint return. In addition to four dependent children, they have an Adjusted Gross Income (AGI) of 125,000 and itemized deductions of29,000. What is their taxable income?

1) $96,000
2) $96,500
3) $95,500
4) $95,000

Answer 1

To calculate Aaron and Michele's taxable income, we subtract their itemized deductions of $29,000 from their Adjusted Gross Income of $125,000. Their taxable income is thus $96,000.

Step-by-step explanation:

The question asks how to calculate taxable income for a married couple filing jointly with a specified adjusted gross income (AGI) and itemized deductions. According to the basic formula for taxable income:

taxable income = adjusted gross income - (deductions and exemptions).

Since the question provides the AGI as $125,000 and the itemized deductions as $29,000, we subtract the deductions from the AGI to determine the taxable income:

taxable income = $125,000 - $29,000.

Therefore, the taxable income for Aaron and Michele is $96,000.

The correct answer is option 1: $96,000.