Taxable Income: Deductions and Exemptions

1. Joe and Jane are married taxpayers who file a joint return. They have itemized deductions of $11,250 and four exemptions. Assuming an adjusted gross income of $40,000, what is their taxable income for 2008?

2. Compute Marie's taxable income for 2008, assuming she is single and claims two dependent children. Her adjusted gross income is $70,000 and she has itemized deductions of $9,000.

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Solution Preview income = 40,000
Less: Itemized deductions = 11,250
Less: Personal exemptions = 14,000
Taxable income = 14,750.

Actual itemized deductions are used because they are greater than the standard ...