Question

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. (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
2)	For AGI deductions
3)	Adjusted gross income
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

Answer 1

Answer :

Note : Tax is not given. So answer is given as per tax year 2020.

(a).

S.No	Description	Explanation	Amount
1	Gross Income	(100000+10000)	110000
2	For AGI Deduction	-	0
3	Adjusted Gross Income	-	110000
4	Standard deduction	(Per 2020 TCJA)	$24,800
5	Itemized deduction	-	$16,500
6	Greater of standard or Itemized deduction	-	$24,800
7	Deduction for qualified business income	(10000*20%)	$2,000
8	Total deduction from AGI	-	$26,800
9	Taxable income	(110000 - 26800)	$83,200
10	Income tax liability	(9235)+(83200-80250)*22%	$9,884
11	Other taxes	-	-
12	Total Taxes	-	$9,884
13	Credits	(2000*3)+(500)	$6,500
14	Prepayments	-	$3,050
	Tax Liability	(9884-6500-3050)	334

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