Question

Bruce and Anna Wayne

3 children living at home under the age of 17

$78,000 gross annual combined salaries

$2,000 invested in Bruce's IRA during the year

$580 in a savings account interest

$400 in dividends from Bats Inc

300 shares of stock sold for $27 per share on July 2, this year (plus a $50 brokerage

commission).  The stock was purchased for $10 per share 1 year ago (plus a

$50 brokerage commission).

$4,300 in medical expenses

$9,000 in home mortgage interest

$3,000 given to charity

$2,500 paid in state income taxes

$1750 paid in local property taxes

$7,460 Federal Income tax withheld during the year

QUESTION:

What is their taxable income (on ordinary income), and how much total Federal income tax do they owe (via ordinary and investment invome)? (Remember to take the capital gains and dividends out, calculate taxes owed, and then tax them at the applicable rate and add the tax due to that due on ordinary income.)

Answer 1

Particulars	Salary	Expenses	Taxable Income
Gross Salary	78000		78000
Bruce IRA (Retirement)		2000	-2000
Saving account interest	580		+580
Dividends	400
Capital Gains on stock	17x300=5100
Brokerage commission		100
medical expenses		4300	-4300
mortgage interest		9000	-9000
Charity		3000	-3000
State income tax		2000	-2000
Local Property Tax		1750	-1750
Total			56530

Federal Income Tax are levied on Ordinary income according to the latest federal tax rates for married filing jointly.

Tax on ordinary income = 19400x10% + 12%x37130 = 1940 + 4455.6 =6395.6

Capital gains Tax is calculated using Capital gains and Dividend.

Total Capital gains = 5500

Tax on Capital Gains = 0 (0% tax rate)

So, Total Taxes they owe = $6395.6

(You can modify Tax rates according to you. I have tried to latest data available for US. Source: https://www.forbes.com/sites/jrose/2018/12/05/tax-brackets-and-rates-2019/#32c722053ec5)