Student Loan Interest
Solution:
Her deduction is $1,667.50
$130,000 AGI - $120,000 threshold = $10,000 excess
$10,000 excess/$30,000 phase out range = 33.3% phase out
$2,500 maximum – ($2,500 x 33.3% phase out) = $1,667.50.
21.
Dependency Exemptions
Solution:
One. Miriam’s taxable income ($4,000) is above the allowable $3,650 limit so she
does not pass the gross income test. Mike is a qualifying child so he qualifies as a
dependent.
22.
Standard Deduction
Solution:
$15,800. $11,400 basic standard deduction + $4,400 (4 x $1,100) additional for
age and blindness.
24.
Dependent’s Taxable Income
Solution:
$500. $2,500 wages + $800 dividend income = $3,300 AGI - $2,800 standard
deduction = $500 taxable income.
A dependent’s standard deduction is the greater of $950 or earned income ($2,500)
plus $300. No personal exemption is allowed.
26.
Phaseout of Exemptions
Solution:
For 2009:
a. $12,167. Their exemptions before phaseout are $14,600 ($3,650 x 4).
($310,250 - $250,200)/$2,500 = 24.02 (round up to 25)
25 x 2 = 50% phaseout percentage
50% x $14,600 x 1/3 phaseout reduction = $2,433.
$14,600 - $2,433 = $12,167
b. $3,236. His exemption before phaseout is $3,650 for one personal exemption.
($207,000 - $166,800)/$2,500 = 16.08 (round up to 17)
17 x 2 = 34% phaseout percentage
34% x $3,650 x 1/3 phaseout reduction = $414
$3,650 - $414 = $3,236.
Note that the phaseout factor was always rounded up to the next whole number
because the phaseout applied to each increment of $2,500 “or fraction thereof.”
For 2010:
a. $14,600
b. $3,650
27.
Medical Expense Deduction
Solution:
$4,250. $14,000 - $3,000 reimbursement – (7.5% x $90,000) floor = $4,250.
Note that if this is Daniel’s only itemized deduction, he would be better off simply