[Porma Fierles]

Hey

In this question, how did they get the 12150 exemption amount?

QUESTION
Mike and Jane Lewis, a married couple, file a joint 2016 federal income tax return. They have one child, age 15, whom they support 100%. Both are under age 65. They have the following income and expenses for the year:

Mike’s wages $65,000
Jane’s wages 60,000
Total allowable itemized deductions 13,000
Mike’s contribution to an IRA 4,000
Jane’s contribution to an IRA 4,000

Mike is not covered by a pension plan at work, while Jane is covered by a plan at her employer.

The exemption amount (per exemption) for 2016 is $4,050. The standard deduction amount for married filing jointly is $12,600.

What is the Lewises’ taxable income amount for 2016?

ANSWER
The Lewises’ taxable income amount is calculated as follows:

Mike’s wages $ 65,000
Jane’s wages 60,000
Mike’s contribution to an IRA (4,000)
Adjusted gross income $121,000
Less: Itemized deductions (13,000)
Less: Exemption amount (12,150)
Taxable income $ 95,850

[suzieemac]

They have three exemptions, one for Mike, one for Jane and one for their dependent child. 3 x $4050 = $12,150.

AUD - 8/12/16
REG - 10/7/16
BEC - 11/18/16
FAR - TBD

#300before30 - Pass the CPA exam before my 30th Birthday.

[Porma Fierles]

Ohhhhhhhhhhhhh, I forgot that the children matter in this scenario. Thanks. I just glazed over the numbers and did not notice there are 3 standard deductions, one for each person.

[Author]

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