Question

Daniel, age 38, is single and has the following income and expenses in 2020:

Salary income $171,000
Net rent income 17,500
Dividend income 500
Payment of alimony (divorce finalized in March 2019) 26,000
Mortgage interest on residence 5,700
Property tax on residence 3,800
Contribution to traditional IRA (assume the amount is fully deductible) 3,000
Contribution to United Church 2,100
Loss on the sale of real estate (held for investment) 700
Medical expenses 4,950
State income tax 1,050
Federal income tax 7,100

Required:
a. What is Daniel's gross income?
b. What is Daniel's AGI?
c. What is Daniel's Total itemized deductions (after any limitations)?

Answer 1

Step-by-step explanation:

Daniel's gross income = (salary + net rent + dividend) income

Daniel's gross income = 171000+17500+500

Gross income = $189000

AGI = Gross income - Contribution to trad. IRA +Loss on sale of real estate

AGI = 189000 - 3000 + 700

AGI = $186700

The total itemized deduction is:

particular explaination amount($)

mortgage interest on residence deductible from AGI 5700

property tax deductible from AGI 3800

contribution on UNited church deductible from AGI 2100

state income tax deductible from AGI 1050

total itemized deduction $12650

NOTE: Only medical expenses that is higher than 10 percent can be deducted for tax.