Mr. and Mrs. Dell, ages 29 and 26, file a joint return and have no dependents for the year. Here is their relevant information. 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.  Compute their adjusted gross income (AGI) and taxable income.

Quizplus · Accepted Answer

The couple's wages ($68,000) minus their 401(k) contributions ($3,300) equals gross income of $64,700. They can take the standard deduction of $12,200 for married filing jointly. Their AGI is therefore $52,500. Since their taxable income is after deductions, subtract the standard deduction from their AGI: $52,500 - $12,200 = $40,300. They also get a $2,600 credit for paying student loan interest, which brings their taxable income to $37,700. However, they must also pay a 10% penalty on their early 401(k) withdrawals of $1,800, which brings their taxable income to $36,900.

Mr and Mrs