Sandy and John Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2023, Sandy worked as a computer technician at a local university, earning a salary of $152,000, and John worked part time as a receptionist for a law firm, earning a salary of $29,000. Sandy also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750. The Fergusons received $800 in qualified dividends and a $200 refund of their state income taxes. The Fergusons always itemize their deductions, get the full benefit of deducting the entire amount of state income taxes paid, and their itemized deductions were well over the standard deduction amount last year. Use Exhibit 8-10, Tax Rate Schedule, Dividends and Capital Gains Tax Rates, 2023 AMT exemption for reference.

The Fergusons reported making the following payments during the year:

• State income taxes of $4,400. Federal tax withholding of $21,000.
• Alimony payments to Sandy's former spouse of $10,000 (divorced 12/31/2014).
• Child support payments for Sandy's child with her former spouse of $4,100.
• $12,200 of real property taxes.
• John was reimbursed $600 for employee business expenses he incurred. He was required to provide documentation for the expenses to his employer.
• $3,600 to Kid Care day care center for Samantha's care while Sandy and John worked.
• $14,000 interest on their home mortgage ($400,000 acquisition debt).
• $3,000 interest on a $40,000 home-equity loan. They used the loan to pay for a family vacation and new car.
• $15,000 cash charitable contributions to qualified charities.
• Donation of used furniture to Goodwill. The furniture had a fair market value of $400 and cost $2,000.

Comprehensive Problem 8-85 Part a (Static)

a. What is the Fergusons' 2023 federal income taxes payable or refund, including any self-employment tax and AMT, if applicable?

Note: Round your intermediate computations to the nearest whole dollar amount.

b. Complete pages 1 and 2 of Form 1040 for John and Sandy.

c. Complete Schedule 1 Form 1040 for John and Sandy.

EXHIBIT 8-10 2023 Earned Income Credit Table

Qualifying Children	(1) Maximum Earned Income Eligible for Credit	(2) Credit %	(3) Maximum Credit (1) (2)	(4) Credit Phase-Out for AGI (or earned income if greater) over This Amount	(5) Phase-Out Percentage	No Credit When AGI (or earned income if greater) Equals or Exceeds This Amount (4) + [(3)/(5)]
Married taxpayers filing joint returns
0	$ 7,840	7.65%	$ 600	$16,370	7.65%	$24,210
1	11,750	34	3,995	28,120	15.98	53,120
2	16,510	40	6,604	28,120	21.06	59,478
3+	16,510	45	7,430	28,120	21.06	63,398
All taxpayers except married taxpayers filing joint returns
0	$ 7,840	7.65%	$ 600	$ 9,800	7.65%	$17,640
1	11,750	34	3,995	21,560	15.98	46,560
2	16,510	40	6,604	21,560	21.06	52,918
3+	16,510	45	7,430	21,560	21.06	$56,838

Source: Internal Revenue Code. "Rev. Proc. 2022-38." www.irs.gov.

2023 Tax Rate Schedules

IndividualsSchedule X-Single

If taxable income is over:	But not over:	The tax is:
$ 0	$11,000	10% of taxable income
$ 11,000	$ 44,725	$1,100 plus 12% of the excess over $11,000
$ 44,725	$ 95,375	$5,147 plus 22% of the excess over $44,725
$ 95,375	$ 182,100	$16,290 plus 24% of the excess over $95,375
$ 182,100	$ 231,250	$37,104 plus 32% of the excess over $182,100
$ 231,250	$ 578,125	$52,832 plus 35% of the excess over $231,250
$ 578,125		$174,238.25 plus 37% of the excess over $578,125

Schedule Y-1-Married Filing Jointly or Qualifying surviving spouse

If taxable income is over:	But not over:	The tax is:
$ 0	$ 22,000	10% of taxable income
$ 22,000	$ 89,450	$2,200 plus 12% of the excess over $22,000
$ 89,450	$ 190,750	$10,294 plus 22% of the excess over $89,450
$ 190,750	$ 364,200	$32,580 plus 24% of the excess over $190,750
$ 364,200	$ 462,500	$74,208 plus 32% of the excess over $364,200
$ 462,500	$ 693,750	$105,664 plus 35% of the excess over $462,500
$ 693,750		$186,601.5 plus 37% of the excess over $693,750

Schedule Z-Head of Household

If taxable income is over:	But not over:	The tax is:
$ 0	$ 15,700	10% of taxable income
$ 15,700	$ 59,850	$1,570 plus 12% of the excess over $15,700
$ 59,850	$ 95,350	$6,868 plus 22% of the excess over $59,850
$ 95,350	$ 182,100	$14,678 plus 24% of the excess over $95,350
$ 182,100	$ 231,250	$35,498 plus 32% of the excess over $182,100
$ 231,250	$ 578,100	$51,226 plus 35% of the excess over $231,250
$ 578,100		$172,623.5 plus 37% of the excess over $578,100

Schedule Y-2-Married Filing Separately

If taxable income is over:	But not over:	The tax is:
$ 0	$ 11,000	10% of taxable income
$ 11,000	$ 44,725	$1,100 plus 12% of the excess over $11,000
$ 44,725	$ 95,375	$5,147 plus 22% of the excess over $44,725
$ 95,375	$ 182,100	$16,290 plus 24% of the excess over $95,375
$ 182,100	$ 231,250	$37,104 plus 32% of the excess over $182,100
$ 231,250	$ 346,875	$52,832 plus 35% of the excess over $231,250
$ 346,875		$93,300.75 plus 37% of the excess over $346,875

Tax Rates for Net Capital Gains and Qualified Dividends

Rate*	Taxable Income
Married Filing Jointly	Married Filing Separately	Single	Head of Household	Trusts and Estates
0%	$0 - $89,250	$0 - $44,625	$0 - $44,625	$0 - $59,750	$0 - $3,000
15%	$89,251 - $553,850	$44,626 - $276,900	$44,626 - $492,300	$59,751 - $523,050	$3,001 - $14,650
20%	$553,851+	$276,901+	$492,301+	$523,051+	$523,051+

*This rate applies to the net capital gains and qualified dividends that fall within the range of taxable income specified in the table (net capital gains and qualified dividends are included in taxable income last for this purpose).

EXHIBIT 8-5 2023 AMT Exemptions

Filing Status	Exemption	Phase-Out Begins at This Level of AMTI	Phase-Out Complete for This Level of AMTI
Married filing jointly	$126,500	$1,156,300	$1,662,300
Married filing separately	63,250	578,150	831,150
Head of household and single	81,300	578,150	903,150