Question

This is part problem that will allow you to fill the 2018 1040 tax form for Reba. this part of the problem will ask you to fill out their 1040 form. You should complete the appropriate portion of each form or schedule indicated in the instructions. The following basic information is provided for preparing their 2018 1040 form :

Reba Dixon is a fifth-grade school teacher who earned a salary of $38,500 in 2018. She is 45 years old and has been divorced for four years. She receives $1,280 of alimony payments each month from her former husband (divorced in 2016). Reba also rents out a small apartment building. This year Reba received $50,300 of rental payments from tenants and she incurred $19,617 of expenses associated with the rental.

Reba and her daughter Heather (20 years old at the end of the year) moved to Georgia in January of this year. Reba provides more than one-half of Heather's support. They had been living in Colorado for the past 15 years, but ever since her divorce, Reba has been wanting to move back to Georgia to be closer to her family. Luckily, last December, a teaching position opened up and Reba and Heather decided to make the move. Reba paid a moving company $2,170 to move their personal belongings, and she and Heather spent two days driving the 1,458 miles to Georgia.

Reba rented a home in Georgia. Heather decided to continue living at home with her mom, but she started attending school full-time in January at a nearby university. She was awarded a $3,160 partial tuition scholarship this year, and Reba helped out by paying the remaining $500 tuition cost. If possible, Reba thought it would be best to claim the education credit for these expenses.

Reba wasn't sure if she would have enough items to help her benefit from itemizing on her tax return. However, she kept track of several expenses this year that she thought might qualify if she was able to itemize. Reba paid $5,960 in state income taxes and $12,660 in charitable contributions during the year. She also paid the following medical-related expenses for herself and Heather:

   Insurance premiums$5,955Medical care expenses$1,260Prescription medicine$510Nonprescription medicine$260New contact lenses for Heather$360

Shortly after the move, Reba got distracted while driving and she ran into a street sign. The accident caused $1,060 in damage to the car and gave her whiplash. Because the repairs were less than her insurance deductible, she paid the entire cost of the repairs. Reba wasn't able to work for two months after the accident. Fortunately, she received $2,160 from her disability insurance. Her employer, the Central Georgia School District, paid 60% of the premiums on the policy as a nontaxable fringe benefit and Reba paid the remaining 40% portion.

A few years ago, Reba acquired several investments with her portion of the divorce settlement. This year she reported the following income from her investments: $2,360 of interest income from corporate bonds and $1,660 interest income from the City of Denver municipal bonds. Overall, Reba's stock portfolio appreciated by $12,160 but she did not sell any of her stocks.

Heather reported $6,520 of interest income from corporate bonds she received as gifts from her father over the last several years. This was Heather's only source of income for the year.

Reba had $10,000 of federal income taxes withheld by her employer. Heather made $1,000 of estimated tax payments during the year. Reba did not make any estimated payments. Reba had qualifying insurance for purposes of the Affordable Care Act (ACA)."

use (Tax Form 1040) for year 2018 and use the information above to enter the required values in the appropriate fields.

Answer 1

Description	Amount	Explanation
Gross Income:
Salary	$38500
Alimony received	15360	$1,280 per month × 12 months
Rental receipts	50300
Disability insurance payments	1296	$864 of $2160 (40%) of payment excluded because taxpayer paid 40% of premium on insurance policy
Interest income from corporate bonds	2360
Interest income from municipal bonds	0
(1) Gross income	$107816
Deductions for AGI:
Expenses for rental property	19,617
(2) Total for AGI deductions	19,617
(3) AGI	$88199	(1) – (2)
From AGI deductions:
Medical expenses	1470	$8085 – 6615 [7.5% × (3)] = $1500
State income taxes	5960
Charitable contributions	12660
(4) Total itemized deductions	20090
(5) Standard deduction	18,000	Head of household filing status. See Note A. below
(6) Greater of itemized deductions or standard deduction	20090	Greater of (4) or (5)
(7) Taxable income	$68109	(3) – (6)
(8) Tax on taxable income	$9532	$5,944 + 3478 [22% × (68109 – 51,800)] (using head of household tax rate)
(9) Credits	1,000	American opportunity credit of $500 for tuition paid on Heather’s behalf (full amount qualifies for credit) and $500 credit for other dependent
(10) Tax prepayments	10,000	Withholding
Tax refund with return	$(1468)	(8) – (9) - (10).

Medical expense = 5955+1260+510+360 = 8085