Bill and Mary plan to marry in December 2018. Bill's salary is $105,000 and he owns...
Bill and Mary plan to marry in December 2018. Bill's salary is $105,000 and he owns his residence. His itemized deductions total $ 19 comma 000. Mary's salary is $86,000. Her itemized deductions total only $8,100 as she does not own her residence. For purposes of this problem, assume 2019 tax rates and standard deductions are the same as 2018.
Requirements:
A. What will their 2018 tax be if they marry before year-end and file a joint return?
| adjusted Gross income | ? |
| minus: | |
| itemized deductions | ? |
| taxable income | ? |
B. What will their combined 2018 taxes be if they delay the marriage until 2019?
C. What factors contribute to the difference in taxes?
Homework Answers
Part A
| Adjusted gross income (105000+86000) | 191000 |
| Deductions from AGI | |
| Greater of standard deductions or itemized deductions (24000 or (19000+8100)) | (27100) |
| Taxable income | 163900 |
| Tax liability | 27937 |
Tax 2018(married filling jointly ) = 8907+(22%*(163900-77400)) = 27937
Part B
Bill's tax
| AGI | 105000 |
| Deductions from AGI | |
| Greater of standard deductions or itemized deductions (12000 or 19000) | (19000) |
| Taxable income | 86000 |
| Bill's tax 14089.50+(24%*(86000-82500)) | 14929.50 |
Mary's tax
| AGI | 86000 |
| Deductions from AGI | |
| Greater of standard deductions or itemized deductions (12000 or 8100) | (12000) |
| Taxable income | 74000 |
| Mary's tax 4453.50+(22%*(74000-38700)) | 12219.50 |
Combined tax = 14929.50+12219.50 = $27149
Part C
Mainly, it is the filling status which contributes significantly to the difference in taxes. Moreover, the type of property, gambling, medical expenses, etc. affects the tax amount.
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