Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine Jr., Michael, and Candice). The couple received salary income of $100,000 and qualified business income of $10,000 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $200,000 and they sold it for $250,000. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $16,500 of itemized deductions, and they had $3,050 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice is 18 years of age, the Jacksons may claim a child tax credit for other qualifying dependents for Candice. The Jacksons are also allowed to claim a $2,400 recovery rebate credit for themselves and a $500 credit for each of their three youngest children. Assume they did not receive the rebate credit in advance.(Use the tax rate schedules.)
a. What is the Jacksons' taxable income, and what is their tax liability or (refund)?
| Description | Amount | |
|
1) |
Gross Income | 110000 |
| 2) | For AGI deductions | 0 |
| 3) | Adjusted gross income | 110000 |
| 4) | Standard Deduction | 24800 |
| 5) | Itemized Deductions | 16500 |
| 6) | Greater of standard deductions or itemized deductions | 24800 |
| 7) | Deduction for qualified business income | |
| 8) | Total deductions from AGI | |
| 9) | Taxable Income | |
| 10) | Income tax liability | |
| 11) | Other taxes | |
| 12) | Total taxes | |
| 13) | Credits | |
| 14) | Prepayments | |
| Refund due or Taxes payable |
Below is the tax rate schedule:
Schedule Y-1-Married Filing Jointly or Qualifying Widow(er)
| If taxable income is over: | But not over: | The tax is: |
|---|---|---|
| $ 0 | $ 19,750 | 10% of taxable income |
| $ 19,750 | $ 80,250 | $1,975 plus 12% of the excess over $19,750 |
| $ 80,250 | $171,050 | $9,235 plus 22% of the excess over $80,250 |
| $171,050 | $326,600 | $29,211 plus 24% of the excess over $171,050 |
| $326,600 | $414,700 | $66,543 plus 32% of the excess over $326,600 |
| $414,700 | $622,050 | $94,735 plus 35% of the excess over $414,700 |
| $622,050 | — | $167,307.50 plus 37% of the excess over $622,050 |
Filled in what I could, not sure if it's correct.
| JACKSONS' TAXABLE INCOME AND TAX LIABILITY | ||
| Particular | Amount($) | Amount($) |
| Salary | 100000 | |
| Income from investment | 10000 | |
| Sale of residence | 250000 | |
| Less : Cost of acquistion | -200000 | |
| Gain from sale of residence | 50000 | |
| Exclusion from taxability | 50000 | |
| Taxable long term gain | 0 | 0 |
| Gross income | 110000 | |
| For AGI deduction | ||
| Standard deduction (a) | 24800 | |
| Itemized Deduction (b) | 16500 | |
| Higher of ( a) or (b) | 24800 | |
| Taxable Income | 85200 | |
| Income tax liability ( working ) | 10324 | |
| Less : Child tax credit ( 2000 * 3 ) | -6000 | |
| less : Tax with holding | -3050 | |
| Tax due | 1274 |
| Working : | Rate | Tax amount($) |
| 0 - 19750 | 10% | 1975 |
| 19750 - 80250 | 12% | 7260 |
| 80250 - 85200 | 22% | 1089 |
| 10324 |
Note : Child tax credit is $ 2000 each child upto the age of 17 years
2000 * 3 = $ 6000
Candice is 18 years of age therefore he is not eligible for child tax credit
Get Answers For Free
Most questions answered within 1 hours.