Problem: Jennifer and Jason Greco are married and file a joint tax return. Their two dependent children (ages 14 and 16) both live at home. The Grecos have the following income and expenses:
Income:
Jennifer's salary $120,000
Jason's net profit from his sole proprietorship 148,000
Interest income on State of Texas bonds 10,000
Interest income on corporate bonds 12,000
Cash dividends 19,000
Long-term capital gain from sale of stock 70,000
Expenses:
Interest on the $850,000 principal from their home acquisition mortgage 48,000
Real property taxes on their home 11,000
Charitable contributions to their church 49,000
Federal income tax withheld from Jennifer's salary 35,000
Estimated federal tax payments for this year 30,000
a. What is their adjusted gross income and taxable income for 2015?
b. What is their net tax due or refund expected for 2015?
c. Using the total tax you computed in part b, what is their effective tax rate as a percentage of their adjusted gross income?
Dennis-Escoffier, Shirley; Fortin, Karen (2015-07-29). Taxation for Decision Makers, 2016 Edition (Page 565). Wiley. Kindle Edition.