Question

Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine Jr., Michael, and Candice). The couple received salary income of $125,000 and qualified business income of $20,000 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $250,000 and they sold it for $300,000. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $18,500 of itemized deductions, and they had $4,050 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice is 18 years of age, the Jacksons may claim a child tax credit for other qualifying dependents for Candice.

Complete the first 2 pages of the Form 1040 and 1040 Schedule 1

Answer 1

Following are the calculations as per tax year 2020.

Can be filled in the form 1040 accordingly.

Total Income $195,000 Total Deductions $24,800 Total Exemptions $0 Taxable Income $170,200 Regular Taxes $20,781 Alternative Minimum Tax $0 Net Investment Income Tax $0 All Tax Credits $6,000 Social Security (Business Income) $2,480 Medicare Tax (Business Income) $580 Total Tax with Credits $17,841 Marginal Tax Rate 22% Tax Pre-payments $4,050 Tax Amount Owe $13,791