1. why are expenses related to tax-exempt income disallowed? 2. Deduction of Taxes. Joyce is a single, cash-method taxpayer. On April 11, 2012, Joyce paid $120 State income taxes with her 2011 state income tax return. During 2012, Joyce had $1,600 in state income taxes withheld. On April 13, 2013, Joyce paid $200 with her 2012 state tax return. During 2013, she had $2,100 in state income taxes withheld from her paycheck. Upon filing her 2013 tax return on April 15, 2013, she received a refund of $450 for excess state income taxes withheld. Joyce had total AGI in 2013 and 2014 of $51,000 and $53,500, respectively. In 2013, Joyce also paid $5,500 in qualified residence interest. a. what is the amount of state income taxes Joyce may include as an itemized deduction for 2012? b. What is the allowed itemized deduction for state income taxes for 2013? c. What is her taxable income for 2013? d. What is her AGI for 2014?