Mike and Jane Lewis, a married couple, file a joint 2015 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 2015 is $4,000. The standard deduction amount for married filing jointly is $12,600.
What is the Lewises' taxable income amount for 2015?
A.
$92,000
B.
$96,000
C.
$96,400
Incorrect D.
$100,000
Explanation :
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 (12,000)
———
Taxable income $ 96,000
Note
The Lewises could not deduct their standard deduction amount since they itemized their deductions. Taxpayers cannot take the standard deduction amount if they itemize their deductions. Taxpayers can elect each year to itemize deductions or take the standard deduction.
Since only Jane is covered by a pension plan at work, Mike may take an IRA deduction in 2015 because they are below the threshold in AGI. Jane's IRA contribution is not deductible since they are above the threshold of $118,000 in AGI and she is covered by a pension plan at work.
I thought Both of 4000 IRA contribution were subject to Phaseout since thier AGI is 125K (above threshold of 118). Thank you guys for your help.
FAR: 71, 77!
AUD: 69, 80
BEC: 72
REG: 84
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