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

Answer:

She can write off up to $126,000 in depreciation

Explanation:

Step 1: Determine total gross income

The formula for the total gross income is;

T=agi+R

where;

T=total gross income

agi=adjusted gross income

R=rental revenue

In our case;

agi=120,000

R=10,000

replacing;

T=120,000+10,000=$130,000

Total gross income=$130,000

Step 2; Determine total net gross income

Total net gross income=total gross income-mortgage interest

total gross income=$130,000

mortgage interest=$4,000

Total net gross income=130,000-4,000=$126,000

She can write off up to $126,000 in depreciation