The Johnsons calculate their income taxes. Several years have gone by since harry and Belinda graduated from college and started their working careers. They both earn good salaries. They believe that they are paying too much in federal income taxes. The Johnsons’ total income last year included HARRY’S salary of $63,000 and Belinda’s salary of $84,000. She contributed $3000 to her 401 (k) for retirement. She earned $400 in interest on savings and checking and $3000 interest income from the trust that is taxed in the same way as interest income from checking and savings accounts. Harry contributed $3000 into a traditional Ira.

A. What is the Johnsons’ reportable gross income on their joint tax return?

B. What is their adjusted gross income?

C. What is the total value of their exemptions?

D. How much is the standard deduction for the Johnsons?

E. the Johnsons is buying a home that has monthly mortgage payments of $3000, or $36,000 a year. Of this amount, $32,800 goes for interest and real estate property taxes.

The couple has a $14,000 in other itemized deductions. Using these numbers and table 4-2, calculate their taxable income and tax liability.

F. Assuming they had a combined $22,000 in federal income taxes withheld, how much of a refund will the Johnsons receive?

G. What is their marginal tax rate?

H. List three additional ways that the Johnsons might reduce their tax liability next year.

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Financial Planning Case 1 The Johnsons Calculate Their Income Taxes Several years have gone by since ... View the full answer