Jason and Mary are married taxpayers in 2015. They are both under 65. For the tax year, they have a total of $41,000 in wages and $500 in interest income. Their deductions for adjusted gross income is $5,000 and their itemized deductions equal $7,950. They claim two exemptions for the year on their joint tax return. What is their 2015 taxable income?
To determine Jason and Mary's 2015 taxable income, we need to follow a step-by-step calculation:
1. Start with the total income: $41,000 in wages + $500 in interest income = $41,500.
2. Subtract their deductions for adjusted gross income: $41,500 - $5,000 = $36,500. This gives us their adjusted gross income (AGI).
3. Determine their allowable exemptions. For 2015, each exemption reduces taxable income by $4,000. They claim two exemptions, so 2 x $4,000 = $8,000 in exemptions.
4. Subtract the exemptions from their AGI: $36,500 - $8,000 = $28,500.
5. Calculate their itemized deductions and compare them to the standard deduction. In 2015, the standard deduction for married taxpayers filing jointly was $12,600. Since their itemized deductions ($7,950) are less than the standard deduction, they will use the higher standard deduction amount.
6. Subtract the standard deduction from the previous step: $28,500 - $12,600 = $15,900.
Therefore, Jason and Mary's taxable income for 2015 is $15,900.