Question

María, age 32, earns $60,000 working in 2022. She has no other income. Her medical expenses for the year total $6,000. During the year, she suffers a casualty loss of $9,500 when her apartment is damaged by flood waters (part of a Federally declared disaster area). María contributes $6,000 to her church and pays $4,000 of state income taxes. On the advice of her friend, Maria is trying to decide whether to contribute $5,000 to a traditional IRA. Complete the table to show the effect the IRA contribution would have on Maria's itemized deductions.

Answer 1

The traditional IRA contribution of $5,000 would increase María's total itemized deductions from $25,500 to $30,500.

Step-by-step explanation:

In order to determine the effect the traditional IRA contribution would have on María's itemized deductions, we need to calculate her itemized deductions without the contribution and then compare it to the deductions with the contribution. Here is the table:

Expense Amount

Medical Expenses $6,000

Casualty Loss $9,500

Charitable Contribution $6,000

State Income Taxes $4,000

Total Itemized Deductions (Without IRA Contribution) $25,500

Traditional IRA Contribution $5,000

Total Itemized Deductions (With IRA Contribution) $30,500

Based on the table, we can see that the traditional IRA contribution of $5,000 would increase María's total itemized deductions from $25,500 to $30,500.

Answer 2

Maria can deduct her traditional IRA contributions from her taxable income when calculating her itemized deductions in 2022.

Step-by-step explanation:

Maria can deduct her traditonal IRA contributions from her taxable income when calculating her itemized deductions. In 2022, the maximum deductible contribution for an individual Maria's age is $6,000. If Maria contributes $5,000 to her traditional IRA, she can deduct that amount from her taxable income, resulting in a lower tax liability.

However, it's important to note that the decision to contribute to a traditional IRA should consider Maria's overall financial goals and retirement plans. Traditional IRA contributions are tax-deductible, but withdrawals in retirement are subject to income tax. Maria should consult with a financial advisor to determine the best course of action for her specific situation.