a. Itemized deductions are $38,680 = $40,000 - 3% × ($355,300 - $311,300). 3 percent of $44,000 is used because it is less than the alternative reduction, which would be 80 percent of $20,000 = $16,000 . Deductible medical expenses are not included in the phase-out calculation.
b. $7,776 The phase-out of each exemption is ($355,300 - $311,300) / $2,500 = 18 × 2% = 36%. Therefore, 64 percent of each is still deductible. 64% × (3 × $4,050) = $7,440.
c. $308,844 = $355,300 - $38,680 - $7,776.