Chapter 4, Problem 6DC2

Austin and Anya Gould are a middle-aged couple with two children, Rusty, age 13, and Sam, age 11, whom they adopted this year. They also bought a new home in the area to give the children a yard in which to play. The Goulds have an extensive retirement portfolio invested primarily in growth-oriented mutual funds. Their annual investment income is only $500, none of which is attributable to capital gains. Austin works in the banking industry and receives an annual income of $32,500. Anya, who owns the only travel agency in town, makes about $40,000 a year.

The Goulds give extensively to charities. They also have tax deductions from their mortgage interest expense, business expenses, tax expenses, and unreimbursed medical expenses, as follows:

Health insurance (provided by Anya)	$2,200
Rusty’s braces	$1,500
Mortgage interest expense	$7,200
Real estate taxes	$900
Investment and tax planning expenses	$1,450
Other medical expenses	$3,600
Charitable contributions	$3,500
Moving expenses	$3,000
Austin’s unreimbursed business expenses	$2,300
Qualified adoption expenses	$6,700
State taxes withheld and owed	$4,000

6. What credits might the Goulds use to reduce their tax iability?