Question

Marc and Michelle are married and earned salaries this year of $64,000 and $12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Marc contributed $2,500 to an individual retirement account, and Marc paid alimony to a prior spouse in the amount of $1,500. Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $2,000 child tax credit for Matthew. Marc and Michelle 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. (Use the tax rate schedules.)

a. What is the total amount of Marc and Michelle’s deductions from AGI?

b.What is Marc and Michelle’s taxable income?

c.What is Marc and Michelle’s taxes payable or refund due for the year?

Answer 1

a. What is the total amount of Marc and Michelle’s deductions from AGI?

Standard deduction for married filing jointly ( year 2017 ) = $ 12700

Itemised deductions = $ 6000 ( given in question )

Since Standard deduction is more than Itemised deductions, so we will go with Standard deduction.

Personal and dependency exemptions = 4050 * 3 = $ 12150

Total deductions = 12700 + 12150 = $ 24850

b.What is Marc and Michelle’s taxable income?

Gross income =( 64000 + 12000 ) salary + 500 Corporate bond intt. = 76500

AGI = 76500 - 2500 qualified moving exp. - 1500 alimony paid = 72500

Taxable income = 72500 - 24850 = $ 47650

c.What is Marc and Michelle’s taxes payable or refund due for the year?

( 47650 - 18650 ) * 15 % + 1865 = $ 6215

Less:- credits 2000 Less:- Prepayments 5500

Taxes refundable = $ 1285

The calculations have been made for the year 2017.