Question

John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for law firm earning a salary of $29,000. John also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750. The Fergusons received $800 in qualified dividends and a $200 refund of their state income taxes. The Fergusons always itemize their deductions and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance of are purposes of the Affordable Care Act (ACA). The Fergusons reported making the following payments during the year: State income taxes of $4,400. Federal tax withholding of $21,000. Alimony payments to John's former wife of $10,000 (divorced in 2014). Child support payments for John's child with his former wife of $4,100. $12,200 of real property taxes. Sandy was reimbursed $600 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer. $3,600 to Kid Care day care center for Samantha's care while John and Sandy worked. $14,000 interest on their home mortgage ($400,000 acquisition debt). $3,000 interest on a $40,000 home-equity loan. They used the loan to pay for a family vacation and new car. $15,000 cash charitable contributions to qualified charities. Donation of used furniture to Goodwill. The furniture had a fair market value of $400 and cost $2,000. Required to use 2019 rules: What is the Fergusons' 2019 federal income taxes payable or refund, including any self-employment tax and AMT, if applicable?

Answer 1

Amounts are in $

Description	Amount	Amount
Gross Income		185,250
Salary	181,000
Other income (net of expense)	3,250
Dividend	800
State Income tax refund	200
Less : Alimony		(10,000)
AGI		175,250
Itemized Deductions		(49,000)
State Income Tax	4,400
Real property tax	12,200
Home mortgage loan	14,000
Home equity loan	3,000
Charitable contributions in cash	15,000
Charitable contributions in kind	400
Taxable Income		126,250

Tax on such amount

On ordinary income = (19,400-0) x 10% + (78,950-19,400) x 12% + (125,450-78,950) x 22%

= 19,316

On Dividend income = 800 x 15% = 120

Total Tax = 19,436

AMT :

26% on (175,250-111,700) = 16,523 (maximum allowable limit for 2019 is 111,700 for married and joint filers)

Tax payable

On ordinary income = 19,316

Less :

Child care = 3,000 (maximum allowable limit)

Total tax payable = 16,316

Tax withheld = 21,000

Tax refund = 4,477

Tax to be payable on = 120

We need to get the Balance refundable amount

Note :

Amount spent and reimburses from employer is not deductible

Assumed dividend is qualified to be taxed at preferential rate