Steve and Sue are married with three dependent children. Their 2015 joint income tax return shows $389,000 of AGI and $60,000 of itemized deductions made up of $30,000 of state income taxes and $30,000 of charitable contributions.
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To determine the taxable income for Steve and Sue, you need to calculate their adjusted gross income (AGI) and subtract their itemized deductions.
AGI is the total income earned by Steve and Sue in 2015, before any deductions or credits. In this case, their AGI is reported as $389,000.
Itemized deductions are certain expenses that individuals can subtract from their AGI to lower their taxable income. In this case, Steve and Sue have $60,000 of itemized deductions, including $30,000 of state income taxes and $30,000 of charitable contributions.
To calculate the taxable income for Steve and Sue, subtract their itemized deductions from their AGI:
Taxable Income = AGI - Itemized Deductions
= $389,000 - $60,000
= $329,000
So, the taxable income for Steve and Sue is $329,000.