Question

A) Mr. and Mrs. T have two young children, and file a joint return. They have salary income of $67,000, and interest income of $400. Their itemized deductions total $8,750, and their federal income tax withheld was $2,170. Mrs. T received a cash gift of $20,000 from her aunt during the year.

Compute their refund or balance due (the year is 2018). Show your calculations.

B) Mr. and Mrs. V have three children, and file a joint return. They have no itemized deductions. What is the maximum income they can earn and have a tax liability of zero? Show your calculations.

Answer 1

Hey there!!

Let me help you calculate the tax liabilty of this Married couple filing jointly.

Refer the below stated computation and working notes explaining the amount considered.

Question A Computation of Tax Liabilty in case of Jointly filed Income

	Salary Income	$67,000
	Interest Income	$400
	Cash Gift	$0	( Since tax is owed by the person who gives the gift and not the recepient)
		$67,400
Less	Standard Deduction	-$24,000	( Taking standard deduction of $24000 (As per Federal tax rules 2018) for jointly filed income is beneficial instead of itemised decution of 8750)
	Taxable Income	$43,400

Now, let us calculate tax liabilty, The slab rates are taken as per Federal tax rules 2018,.

	Tax Liability
	Upto 19,050	10%	$1,905
	Upto 77400	12%	$2,922	(43400-19050) = 24350*12%
	Total Tax Liability		$4,827
Less	Child Credit		-$4,000	( 2000$ per child as per Federal tax rules 2018 )
	Net Tax Liability		$827
Less	Tax Withheld		$2,170
	Net Tax Refundable		$1,343

Question B

The maximum income that Mr and Mrs can jointly earn so that there tax liability is Zero is 54,884.

As per IRS, 2018...If the assessee is married and filing jointly and has 3 or more dependent childern, he can claim this Earned Income Tax Credit. To claim the same, the joint income should not exceed $54884.

Also, the assesse can claim refund max amt of which is $6431 with 3 or more qualifying children.

I hope the above solution is clear to you now. Do let me know in case of any concerns.

All the best !!