Question

Bonnie and Jake (ages 35 and 36, respectively) are married with no dependents and live in Montana (not a community property state). Because Jake has large medical expenses, they seek your advice about filing separately to save taxes. Their income and expenses for 2018 are as follows:

Bonnie's salary $42,500 Jake's salary 26,000 Interest income (joint) 1,500 Rental loss from actively managed rental property (23,000) Jake's unreimbursed medical expenses 8,500 All other itemized deductions:* Bonnie 19,000 Jake 6,400 *None subject to limitations

Determine whether Bonnie and Jake should file jointly or separately for 2018.

Answer 1

	Bonnie	Jake	Jointly
Salaries	$ 42,500.00	$ 26,000.00	$   68,500.00
Interest Income	$        750.00	$        750.00	$      1,500.00
Rental Loss			$ (23,000.00)
Adjusted Gross Income	$ 43,250.00	$ 26,750.00	$   47,000.00
Itemized deductions:
Medical Expenses		$    8,500.00	$      8,500.00
Less: 10% of AGI		$ (2,675.00)	$   (4,700.00)
All other	$ 19,000.00	$ 6,400.00	$ 25,400.00
Total Itemized deductions	$ 19,000.00	$ 12,225.00	$ 29,200.00
Personal exemptions	$                 -	$                 -	$                   -
Taxable Income	$ 24,250.00	$ 14,525.00	$ 17,800.00
Tax Due	$ 2,719.50	$    1,552.50	$ 1,780.00

If they file separetly they have to pay a tax of $2,719.5+1,552.50=$4,272

If they File jointly tax is $1,780, So Saving of $ 2,492. So we recommend to file jointly.