Question

Using the married filing jointly status and their income and expense statement, calculate the 2014 tax liability for Shameka and Curtis Williams. First use the standard deduction, and then use the following itemized deductions:

Income:

Earned- $50,000

Interest- 2500

Expense:

Home mortgage interest- $8000

Real estate and state income taxes- 3800

Miscellaneous deductions- 650

Explain to the Williams which method they should use and why.

Shameka and Curtis' total gross income for the 2014 tax year is $__________. Round to the nearest cent. Thanks!

Answer 1

2014 Tax Liability for Shameka & Curtis Williams
Income	$
Earned	50,000	53,000
Interest	2,500	2,100
Expenses
Home Mortgage Interest	8,000	7,900
Real estate and State Income Tax	3,800	5,850
Misc - deduction	650	800
The above question divided into two parts -
1) Taxable Income - other than Itemized dedcution
2) Taxable Income - With Itemized dedcution
Calculate first part - Taxble Income - Other than Itemized deduction
Income	Amnt($)
Earned	50,000
Interest	2,500
Total Income	52,500
Less - Standard deduction amount
of year 2014 for the married couple	12,400
Less - Personal Exemption for the year
2014- Individual deduction $3950
In case of married couple - total
deduction would be $3950*2	7,900
Taxable Income	32,200
Calculate second part - Taxble Income - with Itemized deduction
Income	Amnt($)
Earned	50,000
Interest	2,500
Total Income	52,500
Less- Itemized deduction
Home Mortgage Interest	8,000
Real estate and State Income Tax	3,800
Total Itemized deduction	11,800
Less - Personal Exemption for the year
2014- Individual deduction $3950
In case of married couple - total
deduction would be $3950*2	7,900
Taxable Income	32,800
Suggestion - They should take itemized deduction benefit and Taxable Income
would be $ 32800 and tax Liability as per Chart ( Tax slab)
	Amnt($)
Base part 10% *$18150	1,815
15% *( 32800-18150)	2197.5
Tax Liability	4,013