Question

Brian and Amber Wilson bought a house in 2000 for $250,000 as their principal residence. They paid 15% down payment

They paid the following housing related expenses last year:

Mortgage interest	28,600	Utility	4,210
Mortgage principal	9,470	HOA fees	2,400
Property tax	8,340	Homeowner’s insurance	1,300

a. They should include $_______ in itemized deduction when they file income tax return this year

b. If they are in the 32% income tax bracket, the income tax savings will be $______

c. Assume they file tax return jointly and standard deduction for MFJ is $24,400 this year, then they should choose itemized deduction instead of standard deduction. (True or False)

If they sell this house for $670,000 later this year and pay $46,000 for commission and expenses.

d. Their capital gain from selling the house will be $_______

e. The capital gain is long term or short term? Why?

f. The taxable capital gain will be $____

g. They should pay $_____ in capital gain tax. (Remember, they are in 32% income tax bracket)

Answer 1

(A) I tenised deduction allowed. Mortgage intexst. Boperty taxes. $2860 0 $8340 $36940. (B) Tax saving @ 32% $36900x 32% $ 1182) 1 (C) Tove standard availed, higher of itemesed and carduction can be d) Capital gain = $670000-$46000 - $250000 = $374000 I Gain more is than long term. Cheld for 3 year) cf Taxable capital gain will be $0 Reason' If you have a capital gain from the sale of your main home, you may quality to exclude $250000 of that gun or upto $500000 of that

gain if you Tax liability file a gaunt return on CQ2 &0. Top