Question

Jeremy earned $100,000 in salary and $6,000 in interest income during the year. Jeremy has two qualifying dependent children who live with him. He qualifies to file as head of household and has $17,000 in itemized deductions. Neither of his dependents qualifies for the child tax credit. What is Jeremy's taxable income?

Answer 1

Jeremy's taxable income is calculated by subtracting his itemized deductions of $17,000 from his adjusted gross income ($106,000), resulting in a taxable income of $89,000.

Step-by-step explanation:

The taxable income for Jeremy, who earned a salary of $100,000 and received $6,000 in interest income, can be calculated by considering his filing status, itemized deductions, and the tax benefits of having dependents. Since Jeremy is filing as head of household and has $17,000 in itemized deductions, his gross income would be the total of his earnings ($106,000) minus these deductions. However, given that his dependents do not qualify for the child tax credit, it suggests that there isn't a direct deduction for them in this scenario. Nonetheless, we would calculate Jeremy's taxable income by subtracting his itemized deductions from his adjusted gross income.

Adjusted gross income (AGI): $100,000 (salary) + $6,000 (interest income) = $106,000.

Taxable income: $106,000 (AGI) - $17,000 (itemized deductions) = $89,000.

Jeremy's taxable income would therefore be $89,000.