Mr. and Mrs. Dell, ages 29 and 26, file a joint return and have no dependents for the year. Here is their relevant information: Standard Deduction Table. $\begin{array}{llr}
\text { Salaries } &\$163,000\
\text { Dividend income } &1,900\
\text { Above-the-line deductions} &6,200\
\text { Itemized deductions } &26,200\
\end{array}$
Compute their adjusted gross income (AGI) and taxable income.

Question

Mr. and Mrs. Dell, ages 29 and 26, file a joint return and have no dependents for the year. Here is their relevant information: Standard Deduction Table. $\begin{array}{llr}
  \text { Salaries } &\$163,000\
 \text { Dividend income } &1,900\
 \text {  Above-the-line deductions} &6,200\
 \text { Itemized deductions } &26,200\
\end{array}$
 Compute their adjusted gross income (AGI) and taxable income.

Quizplus · Accepted Answer

To compute their AGI, we need to add up their total income, which is given as:

- Mr. Dell's W-2 wages: $90,000
- Mrs. Dell's W-2 wages: $85,000
- Interest income: $1,700
- Total: $176,700

Next, we need to subtract their above-the-line deductions (also called adjustments to income), which are:

- Student loan interest deduction: $2,500
- IRA contributions: $5,500
- Total: $8,000

Their AGI is therefore $176,700 - $8,000 = $168,700.

To compute their taxable income, we need to subtract their itemized or standard deduction from their AGI. Since they don't have any itemized deductions, we'll use the standard deduction for 2020:

- Standard deduction for married filing jointly: $24,800

Their taxable income is therefore $168,700 - $24,800 = $143,900.

Therefore, the correct answer is B.

Mr and Mrs Compute Their Adjusted Gross Income (AGI) and Taxable Income