Question

For the TAX YEAR 2018, Robert and Serena received in social security $36000. In addition to their social security benefits, they had earned income of $66250 and interest income of $50. Their state refund from 2017 was $600. They had a deduction for AGI of $2000.

1. Determine the amount of taxable social security benefits. Use the 1040 worksheet.

2. Determine the Adjusted Gross Income.

3. Determine the standard or itemized deduction amount based on the following info

A. Medical & Dental Expenses $3600

B. State & Local Taxes $7000

C. Real Estate Taxes $3800

D. Personal Property Taxes $900

E. Mortgage Interest $8900

F. Charity Contributions $24000

4. Determine Taxable Income

5. Determine the Income Tax Liability

**Please state how you came to your answers.

Answer 1

1. Taxable social security benefit:.

If your combined income was more than $34,000, you will pay taxes on up to 85% of your Social Security benefits. For married couples filing jointly, you will pay taxes on up to 50% of your Social Security income if you have a combined income of$32,000 to $44,000.

Robert and Serena received in social security benefit of $36000 and they are filing jointly are taxed At 50% of social security income.

2. Adjusted Gross Income.

Filing Status: Married Jointly

Particulars	Amount in $
Income earned	66250
Interest Income	50
Taxable State refunds	600
Taxable social security benefits (50% of 36,000)	18000
Total income	84900
AGI deductions	(2000)
Adjusted Gross Income	82900

3. Taxable Income

Particulars	Amount in $
Adjusted gross Income	82,900
Deductions
Medical and Dental expenses	Nil
State and local income, sales and personal property taxes	10,000
Mortgage Interest	8,900
Charity contributions	24,000
Total deductions	42,900
Net Taxable Income	40,000

1. Medical and Dental expenses are deductible to the extent they exceed 7.5% of AGI. Hence deduction is Nil
2. Sale and local income taxes , property taxes are deductible subject to cap of $10,000 (married filing jointly)
3. Charitable deductions deductible upto 60% of AGI.
4. Mortgage Interest is deductible.
5. Standard deduction of $ 24,000 is not opted as deduction eligible for by itemizing the deductions is more than the standard deduction

0 – 19,050	10.0%	$ 1,905
19,050 – 40,000= 20,950	12.0%	$ 2,514
Total tax liability		$ 4,419