Question

Jenny's adjusted gross income (agi) is $120,000 a year and she owns a real estate property that generates a rental income of $10,000 annually. if she pays a mortgage interest of $4,000 on her property per year, she can write off up to _____ in depreciation.

Answer 1

To determine the maximum amount Jenny can write off in depreciation, subtract her mortgage interest from her adjusted gross income and rental income. Then, divide the value of her property by its useful life.

Step-by-step explanation:

To calculate the maximum amount Jenny can write off in depreciation, we need to determine her taxable income. Her adjusted gross income (AGI) is $120,000, and she has rental income of $10,000 per year. She can deduct her mortgage interest of $4,000. So her taxable income would be AGI + rental income - mortgage interest = $120,000 + $10,000 - $4,000 = $126,000.

Depreciation refers to the deduction for the decrease in value of a property over time. The maximum amount she can write off in depreciation depends on the value and useful life of the property. Let's assume her property has a useful life of 27.5 years. To calculate the maximum amount she can write off in depreciation, we divide the value of the property by its useful life: $10,000 / 27.5 = $363.64.