Daniel finds a rectangular index card and measures its diagonal to be $8$ centimeters.
Daniel then cuts out equal squares of side $1$ cm at two opposite corners of the index card and measures the distance between the two closest vertices of these squares to be $4\sqrt{2}$ centimeters, as shown below. What is the area of the original index card?

$\textbf{(A) } 14 \qquad \textbf{(B) } 10\sqrt{2} \qquad \textbf{(C) } 16 \qquad \textbf{(D) } 12\sqrt{2} \qquad \textbf{(E) } 18$
Label the bottom left corner of the larger rectangle (without the square cut out) as $A$ and the top right as $D$. $w$ is the width of the rectangle and $\ell$ is the length. Now we have vertices $E, F, G, H$ as vertices of the irregular octagon created by cutting out the squares. Let $I, J$ be the two closest vertices formed by the squares.
The distance between the two closest vertices of the squares is thus $IJ=\left(4\sqrt{2}\right).$
Substituting, we get 
\[(IJ)^2 = (w-2)^2 + (\ell-2)^2 = \left(4\sqrt{2}\right)^2 = 32 \implies w^2+\ell^2-4w-4\ell = 24.\]
Using the fact that the diagonal of the rectangle is $8,$ we get 
\[w^2+\ell^2 = 64.\]
Subtracting the first equation from the second equation, we get \[4w+4\ell=40 \implies w+\ell = 10.\]
Squaring yields \[w^2 + 2w\ell + \ell^2 = 100.\]
Subtracting the second equation from this, we get $2w\ell = 36,$ and thus area of the original rectangle is $w\ell = \boxed{\textbf{(E) } 18}.$
~USAMO333
Edits and Diagram by ~KingRavi and ~MRENTHUSIASM
Minor edit by yanes04