Question

Norman and Nancy Nottingham have been married for 20 years and have four children who qualify as their dependents (Nelson, Nadine, Nora, and Nathanial). The couple received salary income of $190,000 and they sold their home this year. They initially purchased the home 8 years ago for $200,000 and have lived in it ever since. They sold it for $550,000. They sold some stock they had owned for 4 years and had a $3,000 gain on the sale. The Nottingham’s also cashed in a Certificate of Deposit early during the year and paid a $690 penalty on the early withdrawal. The Nottingham incurred $26,500 of itemized deductions and they had $7,250 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for 3 of their children.

Gross Income
Deductions FOR AGI
Adjusted Gross Income
Standard Deduction
Itemized Deductions
Taxable Income
Tax Liability
Amount Due OR Refund

Use the table below to show what you did and did not include in Gross Income and/or other items and your explanation. Feel free to add additional rows as necessary.

Item	Amount	Explanation

USE 2018 TAX RATE SCEDULES!!!!!!!!!

Answer 1

As tax filing status is Married jointly for tax year 2018 as stated in question:-

Gross Income---. 193000

Deductions for AGI-. 690

Adjusted Gross Income -. 192310

Standard Deduction-. 24000

Itemized Deductions-. 26500

Taxable Income-. 165810

Tax liability-. 28373

Credits-. 9744

Other taxes-. 0

Net Tax Payable-. 25450

  

For calculation of Gross total income-

Item. Amount. Explanation

Salary. 190000. As per Federal tax law gross salary received

Short term capital gains. 3000. As per law STCG will treated as income

As Long term capital gains on selling of house is 350000 hence not taxable as limit for tax year 2018 is 500000.

Child tax credit allowed for 3 or more children as per Federal tax law for tax year 2018.

Effective Tax Bracket---. 24%

Effective Tax Rate-. 17%