Case 1: Thomson's Calculate Their Income Taxes.
Several years have gone since Harry and Belinda graduated from college and started working careers. They both earn good salaries. They believe that they are paying too much in federal income taxes. The Thomson's total income last year included Harry's salary of $73,000 and Belinda's salary of $84,000. She contributed $3000 to her 401(k) for retirement. She earned $600 in interest on savings and checking and $4000 interest income from the trust that is taxed in the same way as interest income from checking and savings accounts. Harry contributed $3000 into a traditional IRA.
a) What is Thomson's re-portable gross income on their joint tax return?
b) What is there adjusted gross income?
c) What is the total value of their exemptions?
d) How much is the standard deduction's for the Thomson's?
e) The Thomson's are buying a home that has monthly mortgage of $3000 or $36,000 a year. Of this amount, $32,800 goes for interest and real estate property taxes. The couple has $14,400 in other itemized deductions. Calculate their total tax liability and taxable income.
f) Assuming they had a combined $22,000 in federal income taxes withheld, how much of a refund will the Thomson's receive?
g) What is their marginal tax rate?
h) List three different ways the Thomson's can reduce their tax liability next year.