In: Accounting
GROUP ASSIGNMENT #2:
TAX FORMULA
Demarco and Janine Jackson have been married for 12 years and have four children who qualify as their dependents. Three of the children are under 17, thus qualify for the $2,000 child tax credit (per child). The oldest child is over 17 and qualifies for the child tax credit for other qualifying dependents. Their salaries for the year (2019) totaled $150,000 and they have $10,000 in qualified business income. The Jacksons incurred $26,500 of itemized deductions.
a. What is the Jacksons’ taxable income?
c. Assume the same facts as in part b. except that the Jackson’s report $6,000 of for AGI deductions and $0 itemized deductions. What is the Jackson’s taxable income?
Part A
1 |
Gross income |
|
salary |
150000 |
|
Gain on house sale (excluded) |
||
Qualified business income |
10000 |
|
Gross income |
160000 |
|
2 |
For AGI Deductions |
|
3 |
AGI (1-2) |
160000 |
4 |
Standard deduction for married filing jointly |
24000 |
5 |
Itemized deductions |
26500 |
6 |
Greater of standard deduction and itemized deduction |
26500 |
7 |
Qualified business income deduction (10000*20%) |
2000 |
8 |
From AGI deductions |
28500 |
Taxable income (3-8) |
131500 |
Part B
1 |
Gross income |
|
salary |
150000 |
|
Gain on house sale (excluded) |
||
Qualified business income |
10000 |
|
Gross income |
160000 |
|
2 |
For AGI Deductions |
|
3 |
AGI (1-2) |
160000 |
4 |
Standard deduction for married filing jointly |
24000 |
5 |
Itemized deductions |
6500 |
6 |
Greater of standard deduction and itemized deduction |
24000 |
7 |
Qualified business income deduction (10000*20%) |
2000 |
8 |
From AGI deductions |
26000 |
Taxable income (3-8) |
134000 |
Part C
1 |
Gross income |
|
salary |
150000 |
|
Gain on house sale (excluded) |
||
Qualified business income |
10000 |
|
Gross income |
160000 |
|
2 |
For AGI Deductions |
6000 |
3 |
AGI (1-2) |
154000 |
4 |
Standard deduction for married filing jointly |
24000 |
5 |
Itemized deductions |
6500 |
6 |
Greater of standard deduction and itemized deduction |
24000 |
7 |
Qualified business income deduction (10000*20%) |
2000 |
8 |
From AGI deductions |
26000 |
Taxable income (3-8) |
128000 |
Part D
1 |
Gross income |
|
salary |
150000 |
|
Gain on house sale (excluded) |
||
Qualified business income |
10000 |
|
Gross income |
160000 |
|
2 |
For AGI Deductions |
|
3 |
AGI (1-2) |
160000 |
4 |
Standard deduction for married filing jointly |
24000 |
5 |
Itemized deductions |
26500 |
6 |
Greater of standard deduction and itemized deduction |
26500 |
7 |
Qualified business income deduction (10000*20%) |
2000 |
8 |
From AGI deductions |
28500 |
Taxable income (3-8) |
131500 |
No change because investment is not sold at appreciated value
Part E
1 |
Gross income |
|
salary |
150000 |
|
Gain on house sale (excluded) |
||
Qualified business income |
10000 |
|
Capital loss |
(3000) |
|
Gross income |
157000 |
|
2 |
For AGI Deductions |
|
3 |
AGI (1-2) |
157000 |
4 |
Standard deduction for married filing jointly |
24000 |
5 |
Itemized deductions |
26500 |
6 |
Greater of standard deduction and itemized deduction |
26500 |
7 |
Qualified business income deduction (10000*20%) |
2000 |
8 |
From AGI deductions |
28500 |
Taxable income (3-8) |
128500 |