Question

In: Accounting

Mark and Patricia report adjusted gross income of $410,000 and itemized deductions of $31,000 for the...

Mark and Patricia report adjusted gross income of $410,000 and itemized deductions of $31,000 for the interest on their home acquisition mortgage (principal amount of $890,000 acquired in 2015), $14,000 in state and local taxes, and $38,000 in charitable contributions. They file a joint income tax return and have four dependent children under age 16. What is their taxable income for 2019 and allowable tax credits?

Solutions

Expert Solution

Taxes deduction limited to 10,000

Itemized deductions = 31,000 + 10,000 + 38,000 = 79,000

Particulars Amount Amount
Gross income:
Salary $        410,000
Dividends $                   -  
Capital loss deduction $                   -  
Gross income $        410,000
For AGI deductions $                   -  
Adjusted gross income $        410,000
Less:
Standard deduction $          24,400
Itemized deduction $          79,000
Higher of the two $          79,000
Taxable income $        331,000
Income tax liability $    68,553.00
[ 65497 + ( 331000 - 321450 ) × 0.32 ]

Taxable income is 331,000.

Allowable tax credits = 2,000 per child * 4 = 8,000


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