Their tax is computed as follows: Income: Salary Taxable interest Tax-exempt interest Total Tax-exempt interest Minus: Exclusion: Gross income Minus: Deductions for AGI: IRA contribution Adjusted gross income Minus: Deductions from AGI: Itemized deductions Personal and dependency exemptions $ 78,000 4,000 500 $82,500 (500) $82,000 (5,500) $ 76,500 (15,300) (12,150) $ 49,050 Taxable income Gross tax (2017 tax table) Minus: Credits and prepayments Child credit Federal income tax withheld Tax refund $ 6,429* (1,000) (6.000) (7,000) 571 "The tax rate schedule yields a tax of $6,425. This small variance results from the ranges in the tax table. OBJECTIVE 2 Determine the amount of deductions from Adjusted Gross Income ADDITIONAL COMMENT In 2015, the 44 million taxpayers who itemized claimed $1.3 trillion in deductions. Taxes paid com- prised 44% of the total, whereas interest paid made up 24%. ADDITIONAL COMMENT The floor for the medical expense deduction will increase to 10% for 2019 and later years. This tax is also computed on Form 1040 (see Figure 1:2-1). Note that certain nd- tional information, such as the taxpayers' address and Social Security numbers, included on the return. DEDUCTIONS FROM ADJUSTED GROSS INCOME ITEMIZED DEDUCTIONS Itemized deductions are claimed only if the total of such deductions exceeds the standard deduction. Here, consideration is given to which expenses may be itemized and the rela- tionship between itemized deductions and the standard deduction. Congress allows individuals to itemize specified personal expenses, including med- ical expenses, state and local income taxes and property taxes, home mortgage inter- est, and charitable contributions. A partial list of itemized deductions is found in Table 1:2-6. Congress imposes various restrictions on the extent to which these items can be deducted: Medical expenses: Only the portion exceeding 7.5% of AGI is deductible. State and local taxes: Maximum amount deductible is $10,000 ($5,000 if married fil- ing separately). Home mortgage interest: Only the interest on up to $750,000 is deductible ($1 million for debt incurred before December 16, 2017). Charitable contributions: Maximum amount deductible is 60% of AGI. These restrictions are discussed in more detail in Chapter I:7