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Concept explainers
(1)
Compute net tax payable or refund due for Person A and Person B for 2018.
(1)
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Explanation of Solution
Compute net tax payable or refund due for Person A and Person B for 2018:
Particulars | Amount ($) |
Person B's salary | $62,100 |
Person A's salary | $58,000 |
Interest income | $2,750 |
Adjusted gross income | $122,850 |
Less: Itemized deductions (1) | ($36,486) |
Taxable income | $86,364 |
Tax from 2018 Married filing Joint tax table | $10,882 |
Less: Prepayments and Credits | |
Income tax withheld ($5,300 + $4,500) | ($9,800) |
Dependent tax credit (2) (2 × $500) | ($1,000) |
Net tax payable (or refund due) for 2018 | $82 |
Table (1)
Therefore, net tax payable for 2018 is $82.
Working note (1): Compute the total itemized deductions:
Particulars | Amount ($) | Amount ($) |
Medical expenses: | ||
Medical insurance premiums | $4,500 | |
Doctor bill for Person S paid in 2018 for services in 2017 | $7,600 | |
Operations for Person S | $8,500 | |
Prescription medicines for Person S | $900 | |
Hospital expenses for Person S | $3,500 | |
Total medical expenses | $25,000 | |
Less: Reimbursement received in 2018 | ($3,600) | |
Less: 7.5% of $122,850 AGI | ($9,214) | |
Medical expenses deductible in 2018 | $12,186 | |
Taxes: | ||
State income taxes ($3,100 + $2,950 + $900) | $6,950 | |
Property taxes on residence | $5,000 | |
$11,950 | ||
Overall limit on state and local taxes | $10,000 | |
Qualifies interest on home mortgage | $8,700 | |
Charitable contributions: (3) | ||
Church contribution | $5,000 | |
Tickets to charity dinner dance | $250 | |
(Only the excess of the ticket price of $300 over the cost of comparable entertainment of $50 is deductible) | ||
used clothing donated (limited to fair market value) | $350 | $5,600 |
Total itemized deductions | $36,486 |
Table (2)
Therefore, total itemized deductions $36,486.
Note: The expenses for Person A’s uniforms and laundry
Working note (2): Determine the dependent tax credit:
In addition to Person B’ son, Person J, Person B’s father, Person S, eligible as a dependent. Person C cannot be asserted as a dependent as she is not below age of 24 (as a result she is not a eligible child) and has too much income to be a qualifying relative. Person J does not eligible for the child tax credit because he is not under age 17. But both Person J and Person B eligible for the dependent tax credit of $500.
Working note (3): Determine charitable contribution:
The $400 specified to a required family via neither a crowd-funding site nor the $65 given to homeless individuals eligible for a charitable contribution as the amounts were not given to qualified organizations.
(2)
Compute the taxable income and tax liability for 2019 in the given situation.
(2)
![Check Mark](/static/check-mark.png)
Explanation of Solution
Compute the taxable income and tax liability for 2019 in the given situation:
Particulars | Amount ($) |
Person B's salary | $88,000 |
Interest income ($32,000 + $2,750) | $34,750 |
Adjusted gross income | $122,750 |
Less: Itemized deductions (4) | ($30,794) |
Taxable income | $91,956 |
Tax liability from 2019 Married, filing jointly tax rate schedule | $11,947 |
Table (3)
Therefore, Tax liability from 2019 married, filing jointly tax rate schedule is $11,947.
Working note (4): Determine the itemized deductions:
Particulars | Amount ($) | Amount ($) |
Medical expenses: | ||
Medical insurance premiums | $9,769 | |
Estimated costs for Person A | $9,000 | |
Less: 10% of $122,750 AGI | ($12,275) | $6,494 |
Taxes: | ||
State income taxes | $7,100 | |
Property taxes on residence | $5,100 | |
$12,200 | ||
Overall limit on state and local taxes | $10,000 | |
Qualified interest on home mortgage | $8,700 | |
Charitable contributions | $5,600 | |
Total itemized deductions | $30,794 |
Table (4)
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Chapter 10 Solutions
Individual Income Taxes
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- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
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