Carl,age 42,is married and has three children.In preparing to go to his accountant,he determines that he has $63,100 of salary income and $250 in dividends.He contributes $4,000 to a Roth IRA and has $6,800 of itemized deductions.His wife has no income.What is the taxable income on their 2013 joint return?

Question

Quizplus · Accepted Answer

To calculate their taxable income, we first need to deduct any adjustments (contributions to a traditional IRA or self-employed health insurance, for example) and deductions (such as itemized deductions or the standard deduction) from their total income (salary income and dividends):
Total income = $63,100 + $250 = $63,350
Adjustments = $4,000 (Roth IRA contribution)
Deductions = $6,800 (itemized deductions)
Taxable income = Total income - Adjustments - Deductions = $63,350 - $4,000 - $6,800 = $52,550

Since they are married filing jointly, they get a standard deduction of $12,200, which we can subtract to get their taxable income: 
Taxable income = $52,550 - $12,200 = $40,350

However, they may also be able to claim additional tax credits or deductions (such as the child tax credit or the earned income credit) that could lower their tax liability even further.

Carl,age 42,is Married and Has Three Children