Problem 7-56 (LO 7-3) Zach and Melissa Nieland file a joint tax return, and they

Question

Problem 7-56 (LO 7-3) Zach and Melissa Nieland file a joint tax return, and they itemize deductions. Assume their marginal tax rate on ordinary income is 25 percent. The Nielands incur $2,500 in miscellaneous itemized deductions, excluding investment expenses. They also incur $1,500 in noninterest investment expenses during the year. What tax savings do they receive from the investment expenses under the following assumptions: (Round your answer to the nearest whole dollar amount.) Problem 7-56 Part-a a. Their AGI is $101,000 Tax savings from investment expense

Explanation / Answer

Calculation of Tax savings from Investment expenses
1) when AGI $101000
Total Investment exp = $2500+$1500=$4000
We cannot claim a deduction for miscellaneous investment-related expenses unless they amount to 2% or more of your adjusted gross income.
2% of AGI =$2020
So Tax savings= $4000-2020=$1980

2) When AGI is $134750.
2% of AGI =2695
So Tax savings Will be
$4000-$2695=$1305

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