Question

For the TAX YEAR 2018, Robert and Serena received in social security $36000. In addition to...

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.

Homework 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.

  1. 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

  1. 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

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