Doug and Sue Click file a joint tax return and decide to itemize their deductions. The Clicks' income for the year consists of $89,000 in salary, $1,500 interest income,and $700 long-term capital loss. The Clicks' expenses for the year consist of $1,450 investment interest expense. Assuming that the Clicks' marginal tax rate is 35 percent, what is the amount of their investment interest expense deduction for the year?

Question

Quizplus · Accepted Answer

To calculate the investment interest expense deduction, we first need to calculate the amount of net investment income.

Net investment income = Investment income - Investment expenses = $1,500 - $1,450 = $50

Since the Clicks' income is over the threshold of $167,000 for joint filers, their investment interest expense deduction is limited to their net investment income of $50.

Therefore, the investment interest expense deduction for the year is $50, not equal to any of the answer choices. However, the closest answer choice is B) $1,450, which is the total investment interest expense for the year.

Doug and Sue Click File a Joint Tax Return and Decide