Exam 5: Deductions for Individuals and Tax Determination

A married person filing a separate return has the lowest standard deduction amount.

Contributions to health savings accounts are made with before-tax dollars.

Holly and Ken (both age 46) are married and have two children living at home: Sara is 19 and earned $19,000 as a secretary.Claudia is 15 and is in high school.Claudia made $4,200 as a model this year, all of which was put into a trust account except for her manager's fee.Ken made $67,600 as an engineer and Holly earned $7,000 as a substitute teacher.If they have $18,000 of itemized deductions, what is Holly and Ken's tax liability on their joint return in 2019 after any allowable credits?

A taxpayer's filing status determines the basic standard deduction allowed.

To file as a surviving spouse, a taxpayer must maintain a home for a dependent child for the entire year.

Susan pays $4,700 for daycare for her dependent mother who had a stroke last year.What is her dependent care credit if her AGI is $40,100 if the phaseout begins at $15,000?

Marcia and Tim, a married couple, file a joint return in 2019.Marcia went back to college this year as a full-time graduate student.What is the maximum reduction they can achieve in their taxes for the $6,800 in tuition that Marcia pays if their AGI is $118,000 and the LLC phaseout range is $116,000-$136,000?

In 2019, Carol, who is 54 and single, earned a salary of $54,000 and $6,000 of interest on State of Nevada bonds.She contributed $2,000 to her Roth IRA, paid a $13,350 hospital bill, state income taxes of $1,500, real estate taxes of $900, mortgage interest of $4,500, and $2,000 interest on her margin account under which she purchased the bonds.What is Carol's taxable income?

A single taxpayer, studying for his master's degree, has an AGI of $59,000.In 2019 he paid $8,000 for college tuition and $2,500 interest on his student loan.In 2019 the LLC phaseout range is $58,000-$68,000 and the loan phaseout begins at $70,000.

Colin (age 40) is single, itemizes his deductions, and has AGI of $100,000.Colin provided the following information about his cash expenditures for 2019: Interest on American Express card 1,200 Points to refinance his home for 10 years at the end of December 2,600 Mortgage interest payments on $250,000 principal amount 11,800 Real estate taxes 2,100 State income taxes withheld on salary 5,400 Additional state income tax estimated payment 1,200 Contribution to Republican Party 2,000 Contribution to United Way 500 If Colin itemizes, what are his total itemized deductions in 2019:

Sean bought a home in 2010 for $625,000 financing $550,000 of the purchase price with a 30 year mortgage.In 2019 when his existing mortgage balance was $520,000, he took out a home equity loan for $150,000.He used the proceeds to pay off credit card debt of $40,000 and purchase a car for $85,000; the balance he used to buy an engagement ring for his girlfriend.In 2019 he paid $30,000 interest on the mortgage and paid interest only of $6,600 on the home equity loan.What is his deduction for qualified residential interest for 2019?

Carl, age 42, is married and has three children.In preparing to go to his accountant, he determines that he has $63,500 of salary income and $250 in dividends.He contributes $4,000 to a Roth IRA and has $6,800 of itemized deductions.His wife has no income.What is the taxable income on their 2019 joint return?

Sales taxes levied on the purchase of depreciable business property are deductible as part of depreciation.

Camila, age 60, is single and has adjusted gross income of $100,000.She paid (with after-tax dollars) the following medical expenses in 2019: Medical msurance premiums \&9,000 Doctors' fees 5,000 Hospital fees 3,000 Eyeglasses 400 Prescription drugs 300 General purpose vitamins 100 She received only $2,000 in reimbursements from her insurance company for her medical expenses.How much can Camila deduct for medical expenses in 2019 if she has $30,000 of other itemized deductions?

All of the following are allowable deductions in determining the alternative minimum tax except:

To qualify as a dependent in 2019, most individuals (except a qualifying child) must earn gross income that is less than:

The alternative minimum tax is a tax determined on a broadened definition of income with no deductions permitted.

Sebastian (age 46) and Kaitlin (age 45) are married and file a joint tax return.Their 2019 adjusted gross income is $390,000 and includes $2,600 in investment income ($2,000 in short-term capital gains and $600 of interest income).They provided 100% of the support for their daughter, Olivia, age 26, who lives with them, and earned $4,700 from her part-time job.They also provided 100 percent of the support for Sebastian's mother, Emily, who is 67, blind, and lives in a nursing home.Emily received $4,000 in Social Security benefits and $450 of interest income.Sebastian and Kaitlin also paid the following amounts in 2019: -$38,500 interest on their home mortgage (acquisition debt) on their principal residence purchased in 1995.The principal amount of the mortgage is $1,250,000. -They also paid $8,250 in real estate taxes on the home. -$6,000 investment interest expense -$7,600 unreimbursed employee business expenses (none for meal or entertainment expenses) -$1,650 in state income taxes to the state of California where Sebastian worked for part of the year -$1,400 in state and local general sales taxes -$490 in fees to their CPA for preparation of their tax return -$2,500 contributed to the State University Athletic Booster Club (to allow them to purchase tickets in good seat locations for football games) and $1,000 contributed to the State University Business School Alumni Association for academic scholarships.They also donated a painting (purchased 11 years ago for $4,200) to the Salvation Army, which was then sold for its fair market value of $17,000 at its fundraising auction. How much can Sebastian and Kaitlin deduct for interest expense for 2019?

Ethan, age 67, and Abigail, age 64, with good eyesight, are married and file a joint tax return.They have adjusted gross income of $1,200,000 for 2019.They have only $5,000 of itemized deduction, so they claim their standard deduction.How much of their standard deduction is phased out in 2019?

Sebastian (age 46) and Kaitlin (age 45) are married and file a joint tax return.Their 2019 adjusted gross income is $390,000 and includes $2,600 in investment income ($2,000 in short-term capital gains and $600 of interest income).They provided 100% of the support for their daughter, Olivia, age 26, who lives with them, and earned $4,700 from her part-time job.They also provided 100 percent of the support for Sebastian's mother, Emily, who is 67, blind, and lives in a nursing home.Emily received $4,000 in Social Security benefits and $450 of interest income.Sebastian and Kaitlin also paid the following amounts in 2019: -$38,500 interest on their home mortgage (acquisition debt) on their principal residence purchased in 1995.The principal amount of the mortgage is $1,250,000. -They also paid $8,250 in real estate taxes on the home. -$6,000 investment interest expense -$7,600 unreimbursed employee business expenses (none for meal or entertainment expenses) -$1,650 in state income taxes to the state of California where Sebastian worked for part of the year -$1,400 in state and local general sales taxes -$490 in fees to their CPA for preparation of their tax return -$2,500 contributed to the State University Athletic Booster Club (to allow them to purchase tickets in good seat locations for football games) and $1,000 contributed to the State University Business School Alumni Association for academic scholarships.They also donated a painting (purchased 11 years ago for $4,200) to the Salvation Army, which was then sold for its fair market value of $17,000 at its fundraising auction. What is Sebastian and Kaitlin's marginal tax rate for 2019 if they itemize their deductions and file as married filing jointly?