Kaylee is a self-employed investment counselor who also owns a rental property.

Question

Kaylee is a self-employed investment counselor who also owns a rental property. Kaylee files single with one personal exemption. This year, she collected $85,000 in fees related to investment counseling business and $15,000 in rental income and paid the expenses listed below.

What is her gross income, deductions for AGI, AGI, deductions from AGI, and taxable income?

Health insurance premiums 4,200 Life insurance premiums 1,900    (whole life policy) Depreciation on the rental property 1,650 Registration fees for investment seminars 2,690 Books on investing 2,850 Repairs of the rental property 1,450 Advertising for investment clients 1,770 State income taxes 4,300 Self employment tax 11,732

Explanation / Answer

Solution:

Calculation of the Adjusted Gross Income:

The books on investing, advertising for investment clients, repairs for the rental property, 50% of the self employment taxes, Depreciation on the rental property, Registration fees for investment seminars and health insurance premiums are deductible for AGI.

The whole life insurance premiums are not deductible, and the state income taxes are only deductible from AGI.

Fees Related to the Investment Counseling Business $85,000 Rental Income $15,000 $100,000 Less: Expenses Books on investing ($2,850) Advertising for investment clients ($1,770) Repairs of the rental property ($1,450) Self employment tax ($11,732 * 50%) ($5,866) Health insurance premiums ($4,200) Depreciation on the rental property ($1,650) Registration fees for investment seminars ($2,690) ($20,476) Adjusted Gross Income (AGI) $79,524

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