2024 – Jeremy and Alyssa Johnson have been married for five years and do not have any

Jeremy and Alyssa Johnson have been married for five years and do not have any children. Jeremy was married previously and has one child from the prior marriage. He is self-employed and operates his own computer repair store. For the first two months of the year, Alyssa worked for Staples Inc. as an employee. In March, Alyssa accepted a new job with Super Toys Inc. (ST), where she worked for the remainder of the year. This year, the Johnsons received $255,000 of gross income. Determine the Johnson’s AGI given the following information (assume the 2013 rules apply for purposes of the qualified education expense deduction):

 

a. Expenses associated with Jeremy’s store include $40,000 in salary (and employment taxes) to employees, $45,000 of supplies, and $18,000 in rent and other administrative expenses.

b. Alyssa contributed $5,000 to a regular IRA. She did not participate in an employer-provided retirement plan. Jeremy currently is not saving for his retirement.

c. The Johnsons own a piece of investment real estate. They paid $500 of real property taxes on the property and they incurred $200 of expenses in travel costs to see the property and to evaluate other similar potential investment properties.

d. The Johnsons own a rental home. They incurred $8,500 of expenses associated with the property.

e. The Johnson’s home was only five miles from the Staples store where Alyssa worked in January and February. The ST store was 60 miles from their home, so the Johnsons decided to move to make the commute easier for Alyssa. The Johnson’s new home was only ten miles from the ST store. However, it was 50 miles from their former residence. The Johnsons paid a moving company $2,000 to move their possessions to the new location. They also drove the 50 miles to their new residence. They stopped along the way for lunch and spent $60 eating at Denny’s. None of the moving expenses were reimbursed by ST.

f. Jeremy paid $4,500 for health insurance coverage for himself (not through an exchange). Alyssa was covered by health plans provided by her employer, but Jeremy is not eligible for the plan until next year.

g. Jeremy paid $2,500 in self-employment taxes ($1,250 represents the employer portion of the self-employment taxes).

h. Jeremy paid $5,000 in alimony and $3,000 in child support from his prior marriage.

i. Alyssa paid $3,100 of tuition and fees to attend night classes at a local university. The Johnsons would like to deduct as much of this expenditure as possible rather than claim a credit.