Shane and Alyssa (a married couple)have AGI of $345,000 in 2016.They bought a house this year and paid $16,000 of interest expense on the mortgage and paid $6,500 of property taxes.They will be allowed a deduction from AGI of
A)$16,200.
B)$22,500.
C)$14,947.
D)$21,489.

Question

Quizplus · Accepted Answer

The couple can deduct their mortgage interest expense and property tax payments as itemized deductions on Schedule A of their tax return. Assuming they do not have any other itemized deductions, their total deduction would be $16,000 + $6,500 = $22,500.

However, their AGI is above the phase-out threshold for itemized deductions, which means their total itemized deductions are reduced by 3% of the amount their AGI exceeds the threshold. For 2016, the phase-out threshold for married couples is $311,300.

So, the couple's deduction would be calculated as follows:

$22,500 - [3% x ($345,000 - $311,300)] 
$22,500 - [3% x $33,700] 
$22,500 - $1,011 
$21,489

Therefore, the best choice is D ($21,489).

Shane and Alyssa (A Married Couple)have AGI of $345,000 in 2016.They