Question

Cathy, age 37, who is single, has the following information:

$100,000 salary

$8,000 interest

$3,000 life insurance dividends

$900 state income tax refund; she itemized deductions last year

$14,000 mortgage interest paid

$5,000 real property tax paid

$7,000 state income tax withheld

$13,000 in cash contributions to the Sacred Heart Catholic Church

What is Cathy's tax liability?

Answer 1

Computation of tax liability of Cathy

Income from salary $1000000

Interest income $8000

(-) Mortgage interest paid $14000

(-) Real property tax paid $5000

(-) State income tax withheld $7000

Total tax liability is $82000

Notes:

1. Life insurane dividends are not taxable

2. State income tax returns are only taxable if itemized current year.

3. Contribution towards a church is only deductable when made in paper form like cheque or electronic medium. Contribution in cash is deductable beyond $250 only if a reciept is taken.