Jenny's adjusted gross income (AGI)is $120,000 a year and she owns a real estate property that generates a rental income of $10,000 annually.If she pays a mortgage interest of $4,000 on her property per year,she can write off up to _____ in depreciation.

Question

Quizplus · Accepted Answer

The amount of depreciation that Jenny can write off on her rental property is determined by the property's cost basis (the original purchase price plus any improvements), divided by 27.5 (the number of years over which the IRS allows for depreciation deductions).

Since we do not have information on the cost basis of the property, we cannot calculate the exact amount of depreciation that Jenny can write off. However, we can estimate it based on the information given.

Jenny's AGI and rental income are both considered in determining her taxable income. She can also deduct mortgage interest and depreciation on her rental property from her taxable income.

Assuming she has no other deductions, her taxable income would be:

$120,000 (AGI) + $10,000 (rental income) - $4,000 (mortgage interest) - $6,000 (depreciation) = $120,000

This means that if she were to write off more than $6,000 in depreciation, her taxable income would fall below $120,000 and she would not be able to take advantage of the full deduction. Therefore, Option C) $6,000 is the best choice.

Jenny's Adjusted Gross Income (AGI)is $120,000 a Year and She