Question

Financial Planning Exercise 6
Calculating taxable income for a married couple filing jointly

Ethan and Zoe Wilson are married and have one child. Ethan is putting together some figures so that he can prepare the Wilson’s joint 2014 tax return. He can claim three personal exemptions (including himself). So far, he’s been able to determine the following with regard to income and possible deductions:

Total unreimbursed medical expenses incurred $1,155

Gross wages and commissions earned 50,700

IRA contribution 5,000

Mortgage interest paid 5,300

Capital gains realized on assets held less than 12 months 1,400

Income from limited partnership 150

Job expenses and other allowable deductions 875

Interest paid on credit cards 360

Dividend and interest income earned 600

Sales taxes paid 2,470

Charitable contributions made 1,150

Capital losses realized 3,475

Interest paid on a car loan 550

Alimony paid by Ethan to his first wife 5,900

Social Security taxes paid 2,700

Property taxes paid 750

State income taxes paid 1,600

Given this information, how much taxable income will the Wilsons have in 2014? (Note: Assume that Ethan is covered by a pension plan where he works, the standard deduction of $12,400 for married filing jointly applies, and each exemption claimed is worth $3,950.) Do not round your intermediate calculations.

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