In 2018, Janet and Ray are married filing jointly. Janet and Ray’s taxable incom

Question

In 2018, Janet and Ray are married filing jointly. Janet and Ray’s taxable income is $2,500,000, and they itemize their deductions as follows: state income taxes of $10,000, and mortgage interest expense of $25,000 (acquisition debt of $500,000). Use Exhibit 8-5 and Tax Rate Schedule for reference.

Phase-Out Begins at

This Level of AMTI

Phase-Out Complete

for This Level of AMTI

a. What is Janet and Ray’s AMT?

Janet and Ray's AMT-

EXHIBIT 8-5 2018 AMT Exemptions Filing Status Exemption

Phase-Out Begins at

This Level of AMTI

Phase-Out Complete

for This Level of AMTI

Married filing jointly $109,400 $1,000,000 $1,437,600 Married filing separately $54,700 $500,000 $718,800 Head of household and single $70,300 $500,000 $781,200

Explanation / Answer

Taxable Income of Janet and Ray = $ 25,00,000

Less: Deductions:

a. State Income Taxes = $10,000

b. Mortgage Interest = $ 25,000

Taxable income after deductions = $ 24,65,000

Janet and Ray's AMT is = $ 8,51,427.38

($1,905 + $7,001.88)

($8,906.88 + $19,271.78)

($28,178.66 + $35,999.78)

($64,178.42 + $27,199.68)

($91,378.10 + $69,999.65)

Rate Married Filing Jointly Amount in $ 10% Up to $19,050 $1,905 12% $19,051 to $77,400 $8,906.88

($1,905 + $7,001.88)

22% $77,401 to $165,000 $28,178.66

($8,906.88 + $19,271.78)

24% $165,001 to $315,000 $64,178.42

($28,178.66 + $35,999.78)

32% $315,001 to $400,000 $91,378.10

($64,178.42 + $27,199.68)

35% $400,001 to $600,000 $1,61,377.75

($91,378.10 + $69,999.65)

37% over $600,000 $8,51,427.38 ($1,61,377.75 + $6,90,049.63)

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