Question

Required information (The following information applies to the questions displayed below.) Reba Dixon is a fifth-grade school teacher who earned a salary of $38,000 in 2020. She is 45 years old and has been divorced for four years. She receives $1,200 of alimony payments each month from her former husband (divorced in 2016). Reba also rents out a small apartment building. This year Reba received $50,000 of rental payments from tenants and she incurred $19,500 of expenses associated with the rental. Reba and her daughter Heather (20 years old at the end of the year) moved to Georgia in January of this year. Reba provides more than one-half of Heather's support. They had been living in Colorado for the past 15 years, but ever since her divorce, Reba has been wanting to move back to Georgia to be closer to her family. Luckily, last December, a teaching position opened up and Reba and Heather decided to make the move. Reba paid a moving company $2,010 to move their personal belongings, and she and Heather spent two days driving the 1,426 miles to Georgia. Reba rented a home in Georgia. Heather decided to continue living at home with her mom, but she started attending school full-time in January and throughout the rest of the year at a nearby university. She was awarded a $3,000 partial tuition scholarship this year, and Reba helped out by paying the remaining $500 tuition cost. If possible, Reba thought it would be best to claim the education credit for these expenses. Reba wasn't sure if she would have enough items to help her benefit from itemizing on her tax return. However, she kept track of several expenses this year that she thought might qualify if she was able to itemize. Reba paid $5,800 in state income taxes and $12,500 in charitable contributions during the year. She also paid the following medical-related expenses for herself and Heather: Insurance premiums Medical care expenses Prescription medicine Nonprescription medicine New contact lenses for Heather $7,952 $1,100 $ 350 $ 100 $ 200 Shortly after the move, Reba got distracted while driving and she ran into a street sign. The accident caused $900 in damage to the car and gave her whiplash. Because the repairs were less than her insurance deductible, she paid the entire cost of the repairs. Reba wasn't able to work for two months after the accident. Fortunately, she received $2,000 from her disability insurance. Her employer, the Central Georgia School District, paid 60 percent of the premiums on the policy as a nontaxable fringe benefit and Reba paid the remaining 40 percent portion. A few years ago, Reba acquired several investments with her portion of the divorce settlement. This year she reported the following income from her investments: $2,200 of interest income from corporate bonds and $1,500 interest income from City of Denver municipal bonds. Overall, Reba's stock portfolio appreciated by $12,000, but she did not sell any of her stocks. Heather reported $6,200 of interest income from corporate bonds she received as gifts from her father over the last several years. This was Heather's only source of income for the year. Reba had $10,000 of federal income taxes withheld by her employer. Heather made $1,000 of estimated tax payments during the year. Reba did not make any estimated payments. Reba had qualifying insurance for purposes of the Affordable Care Act (ACA).

Answer 1

Ansa) Explanation Alimony received . As peu Tan Year 2020 limit, Answer will be different for different year o Description Amount Gross Pncomes Salary $_38,000 $ 1,200 X 12 months 14,400 Rental Receipts 50,000 Disability insurance $ 2,000_X 6094 1,200 Payments Interest Prcome from - 2,200 Corporate bonds Interest Rnreme from Municipal bonde U Gross Income $ 105 800 Deductions for AGI: $ 19,500 Property . 0 Expenses for rental $19.500 (2) Total for AGI Deductions, 3) Adjusted Cross Pncome (och (1)-(2) $ 86,300 from AGI deductions: Medical Expenses $ 9,602 - $8,630 see Note) (10% of (3) $ 972 State Income Tanes Charitable contributions! 5,800 12.500 Total Itemized deductions $19.272

|(5) Standard deductions Head of Householl. filing $ 18,650 statusl. As pes tax Rule 320 Greater of (4) 04 (5) $_19,272 - 6) Greater of Itemized deduction's or Standard cleductions (7 Taxable Income Subtract (3) – (6) $ 86,300 – $ 19,272 $ 67,028 8) Tax on taxable Pncamel As per schedule z- Head of $ 9,094.16 Hous hold Apling status Tax Bracket falls under $ 53,700 to $ 85,500 so, :>) $6,1627 82 0% 0% ($67,028 A $53,700) 0 Credits 1$500 for other dependente + $185 of AOTC (see note) $ 685, Sign can be tt- = (10) Tax Prepayments $ 10,000 Tax Refund $9,094.16 — $685 – $ - 1.590.84 $10,000]

(0.x (6) 3) 634.05 -Tan alorking Note a Adjusted Grosss Income $ 86,300 Single or Head of Household filling Calculation of American opportunity Credit After phase out o Particulars Explanation 1 American Opportunity 500 X 100% $ 500 Creolit before Phare out [As per rule 100% of First $20,000 Expenses Adjusted Gross Pacomie $ 86,300 (AGI) Amount 122 Tar limit AOC__ _$ 80,000 (3) Phaseout thresholl begin Age poy Taxe limit ADC. -14) Excess AGI Subtract (2) - (3) $6,300 $ 86,300 – $80,000 - 6 Phaseout range $ 90,000 $80,000 $ 10,000 As per Tax limit AOC (6) Phaseout Percentage % of (1) out of (5) 63% 6,300 10,000 X100 T7 Phase out Amount $ 315 $185 American Opportunity Subtract (0) - (1) Tax Credit After $ 500 $ 315 Phase out

Note: for Medical Expenses & Pns wrance premiums Add: Medical Care Expenses $ 7,952 L.100 350 2.00 Prescription medicine New contact lenses for Heather Total $ 9,602 $ 86,300 x 10% Medical Expenses I Medical Expenses $9,602 $ 9.602 $972 $8,630 ises a 3 Note: for Taxe on Tasable Pncome. Tanable Income . $ 67,028 Axe per Tan Bracket 2020 schedule Z Head of Household Household Apling status. Taxe Bracket falls falls under $53,700 to $ 85,500 나 Hence, The Tan is = t $6,162 + 22% of Encess over $ 6,462 + 28% of ($ 67,028 – $53,700 $ 6, 162 +0.22 X $ 13,328 $ 6,162 + $ 2,932.16 Tax liability $ 9,094.16. Hence, the Tan on Tanable Ducome is $9,094.16

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