Question

During 2019, Richard and Denisa, who are married and have two dependent children, have the following income and losses: Total salaries $150,000 Bank account interest 25,000 Dividend income 5,000 Short-term capital gains 4,000 Short-term capital losses (1,500) They also incurred the following expenses: Qualified medical expenses $ 8,000 State income taxes paid 12,000 Property taxes on home 2,300 Qualified residence interest 9,000 Investment interest expense 7,500 Cash charitable contributions 15,000 a. Compute Richard and Denisa’s taxable income for the year. b. What is the amount of their tax liability (gross tax), rounded to the nearest dollar? c. What is the amount of their tax due or (refund) if their federal income tax for the 2019 tax year was $18,387.00.

Answer 1

1.

2. 9086+22%(141000-78951)= 22736.78

3. Tax due= tax liability- tax paid

=22736.78-18387

=$4349.78

=$4350

Salaries $150,000.00 Net Income $ 25,000.00 Dividends $ 5,000.00 Net STCG $ 2,500.00 AGI $182,500.00 Itemized Deduction $ 41,500.00 Taxable Income $141,000.00

Itemized deductions: Medical expenses ($8,000 - ($182,500 × 10%)] = $ 0 State income and property taxes-limited to 10,000 Interest on residence 9,000 Investment interest deduction - limited to net investment income ($27,500 interest income and STCG) 7,500 Contributions - limited to 60% x AGI of $182,500 15,000 Itemized deductions $41,500