Using tax formula-beginning with income broadly conceived

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Reference no: EM131908815

John and Grace (both age 47) are married and file a joint tax return. 2017 income includes:

1. Salary of $200000

2. Grace was in a car accident and received compensatory damages of $25000 for her broken nose

3. Grace also received punitive damages of $15000; the person who hit her car was drunk

4. Interest income from Apple bonds in amount of $1000

5. Refund of 2016 NJ income taxes of $2000 (couple itemized their deductions in 2016; itemized deductions exceeded standard deduction by $5000)

John and Grace also incurred and paid the following expenses during year:

6. Medical expenses $7000

7. Parking tickets $300

8. Alimony (John was previously married and paid alimony to his ex-wife) $12000

9. Legal fees associated with divorce proceedings-not tax related $4000

10. Charitable contributions-paid on Dec. 30 2017 w/ a credit card $2000

11. Casualty loss (after $100 floor, but before any further limitations) $1000

12. Mortgage payment on principal residence: principal only $10000

13. Mortgage payment on principal residence: interest expense $14500

14. Property taxes (real estate taxes) on personal residence $4200

15. Nephew, Victor, owns a home and could not make his property tax payment as he is unemployed. Grace paid his property taxes (real estate taxes) $3000

16. Federal income tax withheld $18000

17. Qualified moving expenses in conjunction with a new job $2000

18. Contributions to traditional IRA $4000

19. Cost of new roof on personal residence $14000

20. NJ income tax withheld $1300

Using the Tax formula, beginning with Income Broadly Conceived, provide a detailed calculation of the couple's 2017 taxable income. Your answer must follow the the tax formula. Be certain to compare the standard deduction to total itemized deductions.

Reference no: EM131908815

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