Question

Warren files as a head of household and is 60 years old during 2019. He provides all of the support for his elderly mother who lives in a nearby nursing home and his mother qualifies as his dependent in 2019. Warren has the following tax information for 2019:

- Salary Income .....................................................................................$195,000

- Interest income ......................................................................................... 3,000

- Short-term capital gain .............................................................................. 5,000

- Medical expenses paid for Warren and his mother before the AGI floor ..... 24,300

- State income taxes paid ............................................................................. 9,000

- Property tax paid on residence ................................................................... 7,800

- Mortgage interest paid on residence ......................................................... 12,000

- Interest paid on home equity loan taken out in 2019 to buy a new car ........... 2,800

- Cash contributions to university................................................................. 3,000

- Unreimbursed employee expenses ............................................................. 5,600

- Personal tax return preparation expense...................................................... 1,800

- Casualty loss after $100 floor due to uninsured theft of car ........................ 22,000

Compute Warren’s 2019 taxable income and the amount of tax he still owes or the refund that is due to him after any allowable tax credits and withholding/prepayments of $37,500 that Warren has made in 2019. Ignore any net investment income tax.

Answer 1

ANSWER:

Particulars	Amount	Amount
Salary income		195,000
Interest Income		3,000
Short-term capital gain		5,000
Gross Income and AGI (A)		203,000
Deduction from AGI
Standard deduction		18,350
Itemized Deduction
Medical Expense 24,300 - (7.5% * 203,000)	9,075
Sales and property tax capped	10,000
Mortagage interest expense	12,000
Interest on home equity (eliminated)
Charitable contribution	3,000
Unreimbursed employee expenses (eliminated)
Personal tax return preparation (eliminated)
Casualty loss (not considered because it is more than 10% of AGI)
Total itemized deduction		34,075
Greater of standard or itemized deduction (B)		34,075
Taxable income (A - B)		168,925
Gross tax liability {31,322 + [(168,925 - 160,700) * 32%]}		33,954‬
Less: Other dependent credit		(500)
Less: Prepayments		37,500
Tax still due		nil