Question

Demarco and Janine Jackson have been married for 20 years and have four children who qualify...

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.

Homework Answers

Answer #1
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

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