Make sure to write the question first, followed by an answer.

Case 2: The Andersons Tackle Their Tax Return

Noah and Olivia Anderson are a married couple in their early 20s living in Dallas. Noah Anderson earned $73,000 in 2018 from his job as a sales assistant. During the year, his employer withheld $4,975 for income tax purposes. In addition, the Andersons received interest of $350 on a joint savings account, $750 interest on tax-exempt municipal bonds, and dividends of $400 on common stocks. At the end of 2018, the Andersons sold two stocks, A and B. Stock A was sold for $700 and had been purchased four months earlier for $800. Stock B was sold for $1,500 and had been purchased three years earlier for $1,100. Their only child, Logan, age 2, received (as his sole source of income) dividends of $200 from Hershey stock. Although Noah is covered by his company's pension plan, he plans to contribute $5,000 to a traditional deductible IRA for 2018. Here are the amounts of money paid out during the year by the Andersons:

Medical and dental expenses (unreimbursed) $ 200

State and local property taxes 831

Interest paid on home mortgage 4,148

Charitable contributions 1,360

Total $6,539

In addition, Noah incurred some unreimbursed travel costs for an out-of-town business trip:

Airline ticket $250

Taxis 20

Lodging 60

Meals (as adjusted to 50 percent of cost) 36

Total $366

Critical Thinking Questions: Each question must be explained in detail do the worksheet.

1. 1. Using the Andersons' information, determine the total amount of their itemized deductions. Assume that they'll use the filing status of married filing jointly, the standard deduction for that status is $24,000. Should they itemize or take the standard deduction? Hint: Make a list. What would be the total itemized deduction?

2.2. Prepare a joint tax return for Noah and Olivia Anderson for the year ended December 31, 2018, that gives them the smallest tax liability. Use the appropriate tax rate schedule provided in Exhibit 3.3( Read Chapter 3) to calculate their taxes owed.

( Exhibit 3.3)

Single Taxable Income Tax Rate $0-$0,525 10% of taxable income $9,526-$38,700 $952.50 plus 12% of the amount over $9,525 $38,701-$82,500 $4,453.50 plus 22% of the amount over $38,700 $82,501-$157,500 $14 089.50 plus 24% of the amount over $82,500 $157,501-$200,000 $32,089.50 plus 32% of the amount over $157,500 $200,001-$500,000 $45,689.50 plus 35% of the amount over $200,000 $500,001 or more $150,689.50 plus 37% of the amount over $500,000 Married Filing Jointly or Qualifying Widow(er) Taxable Income Tax Rate $0-$19.050 10% of taxable income $19,051-$77,400 $1,905 plus 12% of the amount over $19,050 $77 401-$165,000 $8,907 plus 22% of the amount over $77,400 $165,001-$315,000 $28,179 plus 24% of the amount over $165,000 $315,001-$400,000 $64,179 plus 32% of the amount over $315,000 $400,001-$600,000 $91,379 plus 35% of the amount over $400,000 $600,001 or more $161,379 plus 37% of the amount over $600,000 Married Filing Separately Taxable Income Tax Rate $0-$9,525 10% of taxable income $9,526-$38,700 $052.50 plus 12% of the amount over $9,525 $38,701-$82,500 $4,453.50 plus 22% of the amount over $38,700 $82,501-$157,500 $14 089.50 plus 24% of the amount over $82,500 $157,501-$200,000 $32 089.50 plus 32% of the amount over $157,500 $200,001-$300,000 $45,689.50 plus 35% of the amount over $200,000 $300,001 or more $80,689.50 plus 37% of the amount over $300,000 Head of Household Taxable Income Tax Rate $0-$13,600 10% of taxable income $13,601-$51,800 $1 360 plus 12% of the amount over $13,600 $51,801-$82,500 $5,944 plus 22% of the amount over $51,800 $82,501-$157,500 $12,698 plus 24% of the amount over $82,500 $157,501-$200,000 $30,698 plus 32% of the amount over $157,500 $200,001-$500,000 $44,208 plus 35% of the amount over $200,000 $500,001 or more $149,208 plus 37% of the amount over $500,000