Question

5.Jacque Smith, an interior designer, is one-year shy of her thirtieth birthday. She has come to you for help in preparing her taxes. Use the information in the chapter, as well as the assumptions below, to answer the following questions:

•She is single;

•She has one child;

•She made $39,500 is wages last year;

•She earned $300 in taxable interest last year;

•Last year she received a $100 tax refund from the State of Georgia, where she is resident;

•She paid $250 in student loan interest;

•She incurred $2,450 in medical expenses, $2,800 in state and property taxes, and made a $3,000 charitable donation to her church;

•She is thinking about going to graduate school next year, which will cost $5,000; she has not yet started saving for this potential expense; and

•She had $4,000 withheld from her pay for federal taxes.

•How many personal exemptions may she claim?

•What is Jacque’s filing status?

•How much must she report on Line 7 of Form 1040 (wages, salaries, etc.)?

•What is Jacque’s total income for the year?

•What is Jacque’s AGI?

•What deduction amount should Jacque claim?

•How much taxable income must she report this year?

•What marginal tax bracket does Jacque fall?

•What is her tax liability for the year?

•How much may Jacque claim in tax credits for the year?

•Is Jacque due a refund this year? Why or why not?

Answer 1

As per the given information Jacque smith can claim the following personal exemptions:

1. Studnet loan interest of $ 250

2. Medical Expenses: $1826(7.5% of AGI)

3.Charitable Donations: 3000

Filing status of Jacque is "Single"

The salaries & wages report on line 7 of form 1080 is: $39500

Jacque smith total Income:

Wages & Salaries: 39500

Interest Income: 300

Less: Student loan Interest paid: 250

Less: Medical expenses: 1826

Less: Donation to the church: 3000

Less: Standard deductions: 12200

Total Income: 22524

Adjusted Total Income is: Gross total Income of $39800-other deductions except medical expenses(250+3000+12200)= 24350

Deduction amount can claim is:

Student loan Interest paid: 250

Medical expenses: 1826

Donation to the church: 3000

Standard deductions: 12200

Taxable Income to be reported is: 22524

Marginal tax rate is: 12%

Tax liability is : $530

Tax credit is: 3470(4000-530)

Refund is $ 3470