Question

1. Reba divorced her husband several years back. In the current year (2019), she received $87,000 in salary, $25,000 in child support from her ex-husband, and $4,500 in interest income. Her three children, Cheyenne, Jake, and Kyra, lived with her this year but only Jake and Kyra qualify as her dependents and count as qualifying persons for determining filing status. In addition, she has $6,000 in total itemized deductions available for the year. Assume she is not subject to AMT, is not self-employed, does not qualify for any additional tax credits, and has not made any prepayments of tax for the year. a. What filing status should Reba use for her 2019 tax return? b. Regardless of your answer in a., assume that Reba used Single as her filing status in 2019. Use the information above, the appropriate Federal Tax Schedule and other values from Appendix D, and the individual tax formula to calculate Reba's 2019 tax due at the end of the year. c. Regardless of your answer in a., assume that Reba used Single as her filing status and had $10,000 of itemized deductions available instead of $6,000. Would this change Reba's taxes due at the end of the year? What is the tax due in this updated scenario? d. Regardless of your answer in a., assume that Reba used Single as her filing status and had $20,000 of itemized deductions available instead of $6,000. Would this change Reba's taxes due at the end of the year? What is the tax due in this updated scenario?

Answer 1

Solution a: Reba is a divorcee as on 31st December 2019 hence she should file as a single for her 2019 tax return.

Solution b:

Reba's Income and Tax computation
Salary	$87,000
Interest Income	$4,500
Taxable Income	$91,500
Less: Standard Deduction	$12,200	(since SD is beneficial than itemized deduction)
Net Taxable Income	$79,300
Estimated Tax 2019	$13,305
Estimated Child tax credit	$4,000
2019 Tax due	$9,305
Federal Tax Workings
Income Bracket	Income	Tax rate	Taxes
$0-$9700	$9,700	10%	$970
$9700-$39475	$29,775	12%	$3,573
$39475-$79300	$39,825	22%	$8,761.50

Solution C: Even if the itemized deductions available is $10,000 instead of $6,000 there will not be any change in the tax due as Reba shall claim standard deductions which is $12,200 which is higher than $10,000.

Solution D: If itemized deduction is $20,000 instead of $6,000 the Reba can claim itemized deduction instead of standard deduction.

Reba's Income and Tax computation
Salary	$87,000
Interest Income	$4,500
Taxable Income	$91,500
Less: Itemized Deduction	$20,000	(since SD is less beneficial than itemized deduction)
Net Taxable Income	$71,500
Estimated Tax 2019	$11,589
Estimated Child tax credit	$4,000
2019 Tax due	$7,589
Federal Tax Workings
Income Bracket	Income	Tax rate	Taxes
$0-$9700	$9,700	10%	$970
$9700-$39475	$29,775	12%	$3,573
$39475-$71500	$32,025	22%	$7,045.50