You've lived a good life and are now 66 and retired, yay! Your younger spouse is only
Question:
You've lived a good life and are now 66 and retired, yay! Your younger spouse is only 59 . You've been happily married for 40 years. You earned social security income of $26,000. Your spouse is still working as a high school teacher, but thanks to a "job sharing' program, they only work part-time for one semester a year and teach Economics. The other semester is covering US Government and is led by another teacher. Your spouse earned $30,000 salary and paid $500 to purchase their own classroom supplies for the year.
Both of you earned a combined total of $5,000 in tax-exempt municipal bond interest income. Your insurance is provided through Medicare now that you're retired. Your spouse's insurance is covered through their employer, who paid $10,000 in medical insurance coverage for them this year. Your spouse also contributed $6,500 to their traditional IRA - individual retirement account (even though they also get to retire with a government pension, I guess saving for retirement is still a high priority and comes with some tax benefits too!).
Gardening has been your hobby for 30 years, and people are always complimenting your garden, so you decided to start a gardening business in your retirement. You lost 2K while trying to start your gardening business because you bought a bunch of pots and soil and invested all that time in watering and pruning the plants but just couldn't stand the idea of actually parting with your beloved plants that you had personally grown and raised yourself. So you cancelled orders at the last minute and refused to actually sell any of your plants to the general public.
You also used to be a workaholic, so you have no idea what to do with your spare time, so you decided to go back to college (for fun I guess?) and get a PhD in Biochemical Engineering (no big deal). You earned a $10,000 scholarship, which you used 8K for tuition, 1K for books and 1K for software costs that were listed under required materials in your course syllabus.
Lastly, you paid 10K in property taxes, 5K in state income taxes, and 10K in federal income taxes throughout the year.
- What is your filing status for the current tax year?
- What amount, if any, qualify as exclusions from Gross Income?
- What is your total Gross Income for tax purposes?
- What amount, if any, would be your allowable for AGI deduction?
- What is your AGI?
- What is your Standard Deduction (we haven't learned itemized deductions yet(
- What is your Taxable Income?
- What is your MARGINAL tax rate?
- What is your Gross Income Tax Liability (total owed in federal taxes for the year)?
- What are your total tax payments ALREADY made towards your tax liability?
- What is your total tax refund or tax due?
- What advice would you give your clients?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill