Ron and Marry (married with three children 7 and 5 and 1) were trying to prepare for their 2018 year income return and they have the following information:

i. Their W-2s showed wages of $66,000 and federal income tax withheld of $4500. In addition, they showed that the couple has paid $3500 in state and city income taxes

ii. They have $2000 interest income from municipal bonds and $1500 interest from their savings account

iii. Their mortgage statement shows t
 hat they have paid $12000 in total and mortgage interest $9800. Their total mortgage is under $750,000.

iv. Their county government record shows that they have paid $10,500 in property tax

v. EACH of them made $5500 IRA contribution

vi. Ron’s student loan interest was $2000 in 2018

vii. Standard deduction is $24,000 for married couple in 2018.

viii. They donated $1500 to Ron and Marry’s alma mater.

Assume there is no other relevant tax information. Should they use itemized deduction or standard deduction? Please show your calculation. Simply answering itemized or standard will earn no points.

What is their taxable income? Based on the following 2018 tax schedule, what is the total tax liability?

Transcribed Image Text:

2018 Income Tax Brackets Rate Individuals Married Filing Jointly 10% Up to $9,525 Up to $19,050 12% $9,526 to $38,700 $19,051 to $77,400 22% 38,701 to $82,500 $77,401 to $165,000 24% $82,501 to $157,500 $165,001 to $315,000 32% $157,501 to $200,000 $315,001 to $400,000 35% $200,001 to $500,000 $400,001 to $600,000 37% over $500,000 over $600,000 2018 Income Tax Brackets Rate Individuals Married Filing Jointly 10% Up to $9,525 Up to $19,050 12% $9,526 to $38,700 $19,051 to $77,400 22% 38,701 to $82,500 $77,401 to $165,000 24% $82,501 to $157,500 $165,001 to $315,000 32% $157,501 to $200,000 $315,001 to $400,000 35% $200,001 to $500,000 $400,001 to $600,000 37% over $500,000 over $600,000

Answer rating: 100% (QA)

Option I Calculation of Tax Liability When Ron and Marry itemized their deduction Particulars Amount ... View the full answer