Question

Use the following information to find the amount of tax due or refund due, if any using the most recent tax rates (2019).

David and Melissa are filing married jointly.

David's wage is $60,000

Melissa's wage is $65,000

Have a 15 year old daughter who qualifies for the child tax credit.

David's income tax withholding from wages is $5,500

Melissa income tax withholding from wages is $6,000

Interest income from checkings = $3,500

Dividend income from brokerage account = $5,000

*No dividends are qualified*

Itemized Deductions are the following:

15,000 property tax paid

$6,000 mortgage interest (all deductible)

$3,000 charitable contributions

$3,500 of sales tax paid

Answer 1

Answer -

Step - ( 1 ) - Information Given -

David and Melissa are Married, filing jointly.

Following information of 2019.

• David's wage is $60000 and Melissa's wage is $65000.
• Have a 15 year old daughter who qualifies for the child tax credit
• David's income tax withholding from wages is $5500
• Melissa income tax withholding from wages is $6000
• Interest income from checking = $3500
• Dividend income from brokerage account = $5000
• Itemized Deductions are -
  • Property tax paid = $15000
  • Mortgage interest = $6000
  • Charitable contributions = $3000
  • Sales tax paid = $3500

.

Step - ( 2 ) -

Computation of Total Income Tax Liability -

Tax filing status is Married, filing jointly.

	Particulars	Reasons / Remarks / Calculations	Amount ($)
A.	David's wage	Given in question	60000
B.	Melissa's wage	Given in question	65000
C.	Interest income	Given in question	3500
D.	Dividend income	Given in question	5000
E.	Adjusted Gross Income	[ A + B + C + D ]	133500
F.	Total Itemized deductions or Standard deduction	Standard deduction of $24400 (as per federal income tax) is more than the Itemized deductions of $19000 ( as per working note -(1)]	(24400)
G.	Taxable Income	[ E - F ]	109100
H.	Income Tax liability	As per Working note -(2)	2219

.

# Working note -(1) - Calculation of Amount deductible on Schedule A as an Itemized Deductions -

Particulars	Reasons / Remarks / Calculations	Amount ($)
Property tax paid and Sales tax paid	Deduction is allowed up to $10000, for a combination of State income taxes and Real estate taxes.	10000
Mortgage interest	Given in question	6000
Charitable contributions	Given in question	3000
Total Itemized Deductions		19000

.

# Working note -(2) - Calculation of Income Tax liability -

Tax Rate	Taxable Income ($)	Calculations	Amount ($)
10%	0 - 19400	[ $19400 * 10% ]	1940
12%	19401 - 78950	[( $78950 - $19400 ) * 12% ]	7146
22%	78951 - 168400	[( $109100 - $78950 ) * 22% ]	6633
Total		[ 1940 + 7146 + 6633 ]	15719
Less - David's income tax withholding from wages		Given in question	(5500)
Less - Melissa income tax withholding from wages		Given in question	(6000)
Less - Child Tax Credit		The Child Tax Credit of $2000 per qualifying child as per Federal income tax law.	(2000)
Income Tax liability		[ $15719 - $5500 - $6000 - $2000 ]	2219