Question

Han and Leia Solo have been married for 24 years and have three children who qualify as their dependents (Jacen, 4; Jaina, 14; and Ben, 16). The couple received salary income of $354,600. They sold some stock they had owned for 4 years and had an $8,000 gain on the sale. They also received $3,000 of corporate bond interest and $6,400 of interest from Jabba City bonds. The Solo’s also cashed in a Certificate of Deposit early during the year and paid a $950 penalty on the early withdrawal. Additionally, Han (who teaches middle school) spent $875 on supplies and snacks for his classroom. The Solos accumulated $30,920 of itemized deductions and they had $31,550 withheld from their paychecks for federal income taxes.

gross income
deductions for AGI
adjusted gross income
standard deduction
itemized deductions
taxable income
tax liability
amount due or refund

Use the table below to show what you did and did not include in Gross Income, Deductions and/or other items and your explanation. Feel free to add additional rows as necessary.

item	amount	explanation

Answer 1

Item	Amount	Explanation
Salary	354,600	Salary income will be taxable
Logn term capital gain	8,000	Will be taxed at preferential rate
Interest on bonds	3,000	Interest on corporate bonds only will be taxable and interest on municipal bonds is exempt
Gross Income	365,600
Less:
Penalty on early withdrawal	950	Penalty on early withdrawal will be allowed as above the line deduction
Educator's expense	250	Educator's expense is deductible upto $250
Adjusted Gross Income	364,400
Less: Itemized deduction	30,920	Maximum amount of Standard deduction is $ 24,400 for married filing jointly which is lower than the itemized deduction in the given case hence itemized deduction is claimed.
Taxable Income	333,480
Tax	67,986.6	Tax calculated using tax slab for the year 2019 and tax on long term capital gain is calculated @ 15%. (Status of taxpayer is assumed as Married filling jointly.)
Less: Child tax credit	6,000	Child tax credit is available $2,000 per qualifying child and age of each child is also less than 17 years. It is assumed that all the children are qualifying.
Less: Withheld tax	31,550
Net payable	30,436.6