Marc and Michelle are married and earned salaries this year of $60,000 and $12,0
ID: 2340987 • Letter: M
Question
Marc and Michelle are married and earned salaries this year of $60,000 and $12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Marc contributed $3,000 to a qualified Individual Retirement Account, and Marc paid alimony to a prior spouse in the amount of $1,500. Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $2,000 child tax credit for Matthew. Marc and Michelle paid $6,000 of expenditures that qualify as itemized deductions and they had a total of $5,500 in federal income taxes withheld from their paychecks during the course of the year. What is Marc and Michelle’s taxes payable or refund due?
Marc and Michelle are married and earned salaries this year of $60,000 and $12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Marc contributed $3,000 to a qualified Individual Retirement Account, and Marc paid alimony to a prior spouse in the amount of $1,500. Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $2,000 child tax credit for Matthew. Marc and Michelle paid $6,000 of expenditures that qualify as itemized deductions and they had a total of $5,500 in federal income taxes withheld from their paychecks during the course of the year. What is Marc and Michelle’s taxes payable or refund due?
Explanation / Answer
Municipal bond interest income is tax-exempt. Alimony and IRA contributions are for AGI deductions. Tax payable on taxable income of $44,000 is $1,905 plus 12% * (44,000-19,050) = $4,889.
Refund due is $2,601
Particulars Amount Amount Gross income: Salary 72,000 Corporate bonds interest 500 Gross income 72,500 For AGI deductions 4,500 AGI 68,000 Less: Standard deduction 24,000 Itemized deduction 6,000 Higher of the two 24,000 Taxable income 44,000 Income tax liability 4,899.00 Payments: Withholding 5,500 Non-refundable credits 2,000 Total payments 7,500 Refund due 2,601.00