Enrico and his wife have combined salaries of $85,000. They have interest and dividends on their investments of $1,000 and annually contribute a combined $3,000 to a traditional IRA
The interest on their home mortgage is $2,500, they contributed $1,000 to their church, and incurred medical expenses not covered by insurance of $1,800. Assuming they can claim two personal exemptions of $4,000 each and file joint tax returns, compute their tax liability for 2015.
A) $11,606
B) $10,056
C) $9,981
D) $8,287
Answer: D
Explanation: D)
Salary $85,000
Interest and dividends $1,000
Gross income $86,000
Less IRA contributions $3,000
AGI $83,000
Less standard deduction $11,900 (greater than itemized deductions of $3,500)
Less exemptions (2) $7,600
Taxable income $63,500
Exhibit 4.6, panel B - $1,740 + 15%($63,500 - $17,400) = $8,655
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