Question

Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine, Michael, and Candice). The couple received salary income of $150,000 and qualified business income of $22,500 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $262,500 and they sold it for $312,500. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $19,000 of itemized deductions, and they had $4,800 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice is 18 years of age, the Jacksons may only claim the child tax credit for other qualifying dependents for Candice. (Use the tax rate schedules.) a. What is the Jacksons’ taxable income, and what is their tax liability or (refund)? (Do not round intermediate calculations.).

Answer 1

Filing status	Joint
Particulars	Amount	Amount
Gross income:
Salary	$        150,000
Business	$          22,500
Gross income		$        172,500
For AGI deductions		$                   -
Adjusted gross income		$        172,500
Less:
Standard deduction	$          24,400
Itemized deduction	$          19,000
QBI deduction		$            4,500
Higher of the two		$          24,400
Taxable income		$        143,600
Income tax liability		$    23,309.00
[ 9086 + ( 143600 - 78950 ) × 0.22 ]
Payments:
Withholding	$            4,800
Child tax credit	$            6,000
Total payments		$          10,800
Tax payable		$          12,509