As you can see, AGI (Adjusted Gross Income - an important line item on the tax form. It is important because many limits are based off of this number) is equal to Gross Income, which includes all income (given), minus the deductions for AGI (given). 9 Please keep in mind that the 'Deductions FOR AGI' are not the same as 'Deductions FROM AGI.' 0 1 Adjusted Gross Income False 2 a Next, determine the amount of deduction they will be able to take from AGI. Will they take the standard deduction, which is $24,400 for "married, filing jointly" (see 1-3d: Standard Deduction or itemized Deductions in Chapter 1), or the itemized deduction of 18,700 (given)? Well, deductions basically reduce your taxable income; so, you should take the higher of the two amounts, right? The text states: "Taxpayers should itemize their deductions only if the total amount exceeds their Standard 3 Deduction." So, let's input that below in "b." 4 5 b Standard or Itemized deduction? False 6 7 Amount of deduction? False 8 9 Next, simply subtract (b) from (a) 0 1 Taxable income 2 3 5 False a 4 The first three parts here are similar to the last problem; please review the notes above if you get stuck. 5 6 Adjusted Gross Income False 7 Enter the higher of Standard or 8 b Itemized Deduction here False 9 0 Taxable income FALSE 1 As you can see, AGI (Adjusted Gross Income - an important line item on the tax form. It is important because many limits are based off of this number) is equal to Gross Income, which includes all income (given), minus the deductions for AGI (given). 9 Please keep in mind that the 'Deductions FOR AGI' are not the same as 'Deductions FROM AGI.' 0 1 Adjusted Gross Income False 2 a Next, determine the amount of deduction they will be able to take from AGI. Will they take the standard deduction, which is $24,400 for "married, filing jointly" (see 1-3d: Standard Deduction or itemized Deductions in Chapter 1), or the itemized deduction of 18,700 (given)? Well, deductions basically reduce your taxable income; so, you should take the higher of the two amounts, right? The text states: "Taxpayers should itemize their deductions only if the total amount exceeds their Standard 3 Deduction." So, let's input that below in "b." 4 5 b Standard or Itemized deduction? False 6 7 Amount of deduction? False 8 9 Next, simply subtract (b) from (a) 0 1 Taxable income 2 3 5 False a 4 The first three parts here are similar to the last problem; please review the notes above if you get stuck. 5 6 Adjusted Gross Income False 7 Enter the higher of Standard or 8 b Itemized Deduction here False 9 0 Taxable income FALSE 1