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Sebastian (Age 46) and Kaitlin (Age 45) Are Married and File

question 104

Multiple Choice

Sebastian (age 46) and Kaitlin (age 45) are married and file a joint tax return. Their 2017 adjusted gross income is $390,000 and includes $2,600 in investment income ($2,000 in short-term capital gains and $600 of interest income) . They provided 100% of the support for their daughter, Olivia, age 26, who lives with them, and earned $4,700 from her part-time job. They also provided 100 percent of the support for Sebastian's mother, Emily, who is 67, blind, and lives in a nursing home. Emily received $4,000 in Social Security benefits and $450 of interest income. Sebastian and Kaitlin also paid the following amounts in 2017: -$38,500 interest on their home mortgage (acquisition debt) on their principal residence purchased in 1995. The principal amount of the mortgage is $1,250,000. They also paid $11,000 in real estate taxes on the home.
-$6,250 interest on a home equity loan (principal amount of $125,000) on their home. They spent $50,000 of the loan proceeds for remodeling their kitchen, $30,000 on a European vacation, and $45,000 for a new car.
-$6,000 investment interest expense
-$7,600 unreimbursed employee business expenses (none for meal or entertainment expenses)
-$4,700 in state income taxes to the state of California where Sebastian worked for part of the year
-$1,800 in state and local general sales taxes
-$490 fee for preparation of their 2016 tax return, paid to their CPA in 2017
-$2,500 contributed to the State University Athletic Booster Club (to allow them to purchase tickets in good seat locations for football games) and $1,000 contributed to the State University Business School Alumni Association for academic scholarships. They also donated a painting (purchased 11 years ago for $4,200) to the Salvation Army, which was then sold for it fair market value of $17,000 at its fundraising auction.
How much can Sebastian and Kaitlin deduct for charitable contributions for 2017?

Definitions:

Grow Amount

The process of increasing the size or value of something, often related to investments or savings over time.

Simple Interest

A financial calculation approach where interest is only derived from the base amount, not including any interest that has built up over time.

Deposit Reached

Achieving the required minimum amount of money in an account to fulfill a particular condition.

Deposit Value

The amount of money placed in an account or invested, which can earn interest over time.