The Smith family is made up of married couple Jennifer and Carl and their young daughter Amelia. Jennifer is a software designer making $62,000 per year, and Carl is an office manager making $41,000 per year. Use the information below for Tax deductions:

Income Taxes

Standard Deduction:

$12,550 for single taxpayers and married taxpayers filing separately

$18,800 for heads of households (single but with dependents)

$25,100 for married taxpayers filing jointly and surviving spouses

Common Tax Credits (simplified):

• Child Tax Credit: $3000 per qualifying child (this does get phased out for higher-income families, but we’ll ignore that here)

• Earned Income Tax Credit: If you have earned income through wages or self-employment: o Credit of $6728 if you have 3 or more qualifying children and AGI is under $51,464 (or $57,414 if you’re married filing jointly)

o Credit of $5980 if you have 2 qualifying children and AGI is under $47,915 (or $53,865 if you’re married filing jointly)

o Credit of $3618 if you have 1 qualifying child and AGI is under $42,158 (or $48,108 if you’re married filing jointly)

o Credit of $1502 if you have no children and AGI is under $21,430 (or $27,380 if you’re married filing jointly)

o NOTE: Married couples filing separately can’t get this credit.

• American Opportunity Credit: Up to $2500 per student (for tuition, books, and fees) during the first four years of college if AGI is under $90,000 (or $180,000 if married filing jointly).

Tax Brackets:

Married Individuals Filing Joint Returns & Surviving Spouses:

$19,901 - $81,050 $1,990 + 12% of the amount over $19,900

$81,051 - $172,750 $9,328 + 22% of the amount over $81,050

Married Filing Separately:

$9,951 - $40,525 $995 + 12% of the amount over $9,950

$40,526 - $86,375 $4,664 + 22% of the amount over $40,525

1. Find the total income tax that Jennifer and Carl would have to pay if they filed jointly and find the total income tax they’d have to pay if they filed separately. Which should they choose, and how much will they save that way? (Assume Amelia is a qualifying child where tax credits are concerned, and do not include FICA taxes here.)

Answer rating: 100% (QA)

Solution A child tax credit is a benefit that a United States taxpayer receives for each dependent c... View the full answer