John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2018, John worked as a comp
uter technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,000. John 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 and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance for purposes of the Affordable Care Act (ACA).
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 John’s former wife of $10,000 (divorced in 2014).
Child support payments for John’s child with his former wife of $4,100.
$12,200 of real property taxes.
Sandy was reimbursed $600 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer.
$3,600 to Kid Care day care center for Samantha’s care while John and Sandy 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.
What is the Fergusons' 2018 federal income taxes payable or refund, including any self-employment tax and AMT, if applicable?
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 John’s former wife of $10,000 (divorced in 2014).
Child support payments for John’s child with his former wife of $4,100.
$12,200 of real property taxes.
Sandy was reimbursed $600 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer.
$3,600 to Kid Care day care center for Samantha’s care while John and Sandy 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.
What is the Fergusons' 2018 federal income taxes payable or refund, including any self-employment tax and AMT, if applicable?
1 answer:
Answer:
Explanation:
The diagram and step by step solution to the answer can be seen in the attached image below
KINDLY NOTE: Self Employment tax (<u><em>which can be said to be a Medicare tax and Social Security paid by self-employed individuals. It is quite similar to the FICA and usually, they are withheld from an employee’s paycheck Medicare taxes and Social Security purposes.)</em></u> is not applicable to both and the AMT is less then the actual normal tax liability so AMT provision also not applicable.
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