Question

Austin and Anya Gould are a​ middle-aged couple with two​ children, Rusty, age 13 and​ Sam, age​ 11, both of 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 also have an extensive retirement portfolio invested primarily in​ growth-oriented mutual funds.Their annual investment income is only $600, none of which is attributable to capital gains. Austin works in the banking industry and receives an annual income of $33000. Anya, who owns the only travel agency in​ town, makes about $39700 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. Remember that Anya has some special tax expense deductions because she is​ self-employed. Be sure to include them when estimating their 2017 taxes.

The​ Goulds' expenses are as​ follows:

Health insurance​ (provided by​ Anya)	​$ 2,200
​Rusty's braces	​$1,400
Mortgage interest expense	​$7,250
Real estate taxes	​$950
Investment and tax planning expenses	​$1,475
Other medical expenses	​$3,200
Charitable contributions	​$3,700
Moving expenses	​$2,900
​Austin's unreimbursed business expenses	​$2,200
Qualified adoption expenses	​$6,400
State taxes withheld and owed	​$4,013

a. Calculate​ Anya's Social Security and Medicare taxes. Calculate how much of these taxes are deductible.

b. Calculate the​ Gould's total income and adjusted gross income for the year.

c. Are the moving expenses​ deductible? Why or why​ not?

d. Should the Goulds take the standard deduction or should they​ itemize? What is the amount of their​ deduction?

e. What tax form will the Goulds​ use? Why?

f. What credits might the Goulds use to reduce their tax​ liability?

Answer 1

c.Moving exepenses are deductible because its allowable adjustment. it comes under tax deductable and retirement contribution.so we can deduct moving expense to find out adjusted gross income.

d.Gould should take the itemized deduction because itemize deduction is more than the standard deduction. its is 11600.

amount of deduction=mortgage interst exp+ other medical interst exp+ state tax withheld and owned=$14463

note:social benefit tax is primarily for the benefit of old age. it is taxed under FICA. the rate 6.2% and medicare is 1.45%

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