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Problem 5-29 Taxes, Contributions, Phase-Out of Itemized Deductions And Exemptions for High-Income Taxpayers (LO 5.2, 5.4, 5.9) Steve and Sue are married with three dependent

Problem 5-29 Taxes, Contributions, Phase-Out of Itemized Deductions And Exemptions for High-Income Taxpayers (LO 5.2, 5.4, 5.9)

Steve and Sue are married with three dependent children. Their 2017 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.

Taxpayers are allowed two types of exemptions: personal and dependency. Each exemption reduces AGI by $4,050. For certain high-income taxpayers, when AGI exceeds the statutory threshold amounts, the exemption deduction is reduced by 2 percent for each $2,500 ($1,250 for married taxpayers filing separately) or fraction thereof by which the taxpayers AGI exceeds the threshold amount.

Calculate the following amounts: In your computations, round any percentage up the nearest whole percent. If required, round your answers to the nearest dollar.

a. Allowable itemized or standard deduction amount $
b. Allowable exemptions deduction amount $
c. Taxable income $

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