Part 1: The Smith family would like to itemize its deductions for the current tax year. The Smiths' adjusted gross income (AGI) is $85,000. Their filing status is Married Filing Jointly. Looking at the items below, which ones can they itemize, and what is the total they can take on their Schedule A itemized deductions?
Show all of your work to obtain full credit.
Part 2: Assuming that the Smiths' standard deduction would be $11,400 for this tax year and that they are in the 25% marginal federal income tax bracket, how much does itemizing save their family in taxes?
Medical expenses 5,000
State income taxes paid 5,000
Real estate taxes 4,000
Home mortgage interest paid 10,000
Gifts to charity 2,000
Credit card interest 1,000
Unreimbursed employee expenses 2,000