Eugene and Velma are married. For 2014, Eugene earned $25,000 and Velma earned $30,000. They have decided to file separate returns and are each entitled to claim one personal exemption. They have no deductions for adjusted gross income. Eugene's itemized deductions are $11,200 and Velma's are $4,000. Assuming Eugene and Velma do not live in a community property state, what is Velma's taxable income?

Question

Quizplus · Accepted Answer

Since Eugene and Velma are filing separate returns, they each get to claim their own standard deduction ($6,200 in 2014) and personal exemption ($3,950 in 2014). Thus, Eugene's taxable income is:

$25,000 - $6,200 - $3,950 - $11,200 = $3,650

Velma's taxable income is calculated the same way, but using her own itemized deductions:

$30,000 - $6,200 - $3,950 - $4,000 = $15,850

Therefore, Velma's taxable income is:

$15,850 + ($11,200-$4,000) = $22,050.

The answer is B.

Eugene and Velma Are Married