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.

11,732

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

Gross Income Fees $85,000 Rental Income $15,000 Deductions FOR AGI Registration fees for investment seminars 2690 Depreciation on the rental property 1650 Repairs of the rental property 1450 Health insurance premiums 4200 Books on investing 2850 Advertising for investment clients 1770 -14610 Adjusted Gross Income $85,390 Deductions FROM AGI State income taxes 4300 Self employment tax = 50% x 11732 5866 less: Total deduction From AGI -$10,166 Less: Personal Exemption -$4,050 Taxable Income $71,174 b) Life insurance premiums will not be included in taxable income they are classified as a personal expense by the IRS when she files her tax return..

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