You have a gross income of $117,151 and are filing your tax return singly. You claim one exemption and can take a deduction of $2,713 for interest on your mortgage, an adjustment of $2,791 for business losses, an adjustment of $1,346 for alimony, a deduction of $2,086 for property taxes, a deduction of $2,376 for contributions to charity, and an adjustment of $1,091 for contributions to your retirement fund. The standard deduction for a single filer is $5,700, and exemptions are each worth $3,650. What is the difference between your adjusted gross income and your taxable income?
The difference is the itemized deductions plus the exemption, because those are subtracted from adjusted gross income to find taxable income. The itemized deductions total $2,713 + $2,086 + $2,376 = $7,175, which is larger than the $5,700 standard deduction; adding the $3,650 exemption gives $10,825. The correct choice is $10,825.
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