B. J. and Carolyn Grace are full-time employees. B. J. is an elementary school teacher, and Carolyn is a registered nurse at a hospital. During the year, they incur the following employment-related expenses:
| School supplies for use in the classroom |
$1,400 |
| Emergency room uniforms |
800 |
| Union dues (teachers association) |
200 |
| Job hunting expenses (Carolyn obtained another nursing |
|
| position but decided not to change jobs) |
1,300 |
| Continuing education correspondence courses |
|
| (required to maintain nursing license) |
380 |
| Professional dues and subscriptions |
1,100 |
None of these expenses are reimbursed by the employers.
For the year, the Graces file a joint return reflecting salary income of $90,000. They also have gambling income of $6,000 and gambling losses of $7,000 (fully substantiated). They pay $400 to have their tax return prepared. They have other itemized deductions (i.e., interest on home mortgage, property taxes on personal residence, state income taxes, and charitable contributions) of $14,500.
Determine the couple's AGI.
Determine the gross amount of miscellaneous itemized deductions subject to the 2%-of-AGI limitation.
Determine the total amount of itemized deductions allowed.