ula lives in Arkansas, which imposes a state income tax. During 2017, she pays t
ID: 2794783 • Letter: U
Question
ula lives in Arkansas, which imposes a state income tax. During 2017, she pays the following taxes:
a. If Paula’s adjusted gross income is $35,000 what is her allowable deduction for taxes, and Paula pays $1,600 in sales tax on a motor vehicle she purchased during the year. What is Paula’s allowable deduction for taxes?
Federal tax withheld $5,125 State income tax withheld 1,900 State sales tax – actual receipts 370 Real estate tax 1,740 Property tax on car (ad valoreum) 215 Social Security tax 4,324 Gasoline taxes 124 Excise taxes 112Explanation / Answer
Paula is allowed deduction for the real estate tax and the property taxes she paid on the car during the current year she can elect to deduct the greater of the amount she paid in state income taxes or her sales tax deduction Determination of Sale tax deduction Table amount $495 Actual amount $370 Which ever is Higher Sale tax deduction =$495 She can deduct higher of State Income tax or Sale tax Deduction Deduction is Higher of $1900 or $495 . Deductionamount is $1900 State Income tax is Higher Federal Income Tax is Not Deductable paula Deduction for Taxes Amount in $ State Income tax 1900 real Estate tax 1740 Property tax on car (Advaloram) 215 Total Tax deduction 3855 (B) Paula pays $1,600 in sales tax on a motor vehicle she purchased during the year. What is Paula’s allowable deduction for taxes? Sale tax deduction =$495+$1600=$2095 She can deduct higher of State Income tax or Sale tax Deduction Deduction is Higher of $1900 or $2095 Deductionamount is $2095 Sale tax deduction Higher Federal Income Tax is Not Deductable paula Deduction for Taxes Amount in $ Sales tax deduction 2095 real Estate tax 1740 Property tax on car (Advaloram) 215 Total Tax deduction 4050
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