Question

Molly and Mark are wife and husband and earned salaries this year of $12,000 and $64,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Mark and Molly also paid $2,500 of qualifying moving expenses, and Marc paid alimony to a prior spouse in the amount of $1,500. Mark and Molly have a 10-year-old son, Matt, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $1,000 child tax credit for Matt. Mark and Molly paid $6,000 of expenditures that qualify as itemized deductions and they had a total of $5,500 in federal income taxes withheld from their paychecks during the course of the year. What is Molly and Mark’s gross income? What is Molly and Mark’s adjusted gross income? What is the total amount of Molly and Mark’s deductions from AGI? What is Molly and Mark’s taxable income? What is Molly and Mark’s taxes payable or refund due for the year (use the tax rate schedules)? Complete the first two pages of Molly and Mark’s Form 1040 (download forms from the IRS website). 2018 TAX LAW

Answer 1

The below table summarizes tax calculation for Molly and Mark:

Salary of Mark	64,000
Salary of Molly	12,000
Interest from Corporate Bonds	500
Gross Income	76,500
Less: Alimony paid	1,500
Adjusted Gross Income	75,000
Less: Standard Deduction	24,000
Taxable Income	51,000
Tax	5,739
Less: Child tax credit	1,400
Net tax	4,339
Tax Withheld	5,500
Refund	1,161

As is visible from the table:

1. Gross Income is $76,500. Interest from municipal bond is exempt from tax.

2. Adjusted Gross Income (AGI) is $76,500. Moving expenses are no longer deductible from 2018.

3. Total deduction from AGI is  $24,000, since itemized deduction is less than standard deduction of $24,000

4. Taxable income is $51,000

5. The refund due is $1,161. Child tax credit allowed is $2,000 from 2018, but the refundable portion is capped till $1,400.

The above information can be used to fill up form 1040.