Question
Help Sav Reba Dixon is a fifth-grade school teacher who earned a salary of $38,000 in 2017. She is 45 years old and has been divorced for four years. She receives $1,.200 of alimony payments each month from her former husband. Reba also rents out a small apartment building. This year Reba received $30,000 of rental payments from tenants and she incurred $19,500 of expenses associated with the rental Reba and her daughter Heather (20 years old at the end of the year) moved to Georgia in January of this year. Reba provides more than one-half of Heather's support. They had been living in Colorado for the past 15 years, but ever since her divorce, Reba has been wanting to move back to Georgia to be closer to her family, Luckily, last December a teaching position opened up and Reba and Heather decided to make the move. Reba paid a moving company $2,010 to move their personal belongings, and she and Heather spent two days driving the 1,426 miles to Georgia During the trip, Reba paid $200 for lodging and $85 for meals. Reba's mother was so excited to have her daughter and granddaughter move back to Georgia that she gave Reba $3,000 to help out with the moving costs Reba rented a home in Georgia. Heather decided to continue living at home with her mom, but she started attending school full-time in January at a nearby university. She was awarded a $3,000 partial tuition scholarship this year, and Reba helped out by paying the remaining $500 tuition cost If possible, Reba thought it would be best to claim the education credit for these expenses. Reba wasn't sure if she would have enough items to help her benefit from itemizing on her tax return. However, she kept track of several expenses this year that she thought might qualify if she was able to itemize. Reba paid $2,800 in state income taxes and $6,500 in charitable contributions during the year. She also paid the following medical- related expenses for her and Heather: Prev 31 of 31!! Next th 10:2 4/4/2 rch
Explanation / Answer
(b):
Reba is allowed to file income tax return as the head of the household since al the conditions required to file tax return as the head of the household have been satisfied by her during the financial year. The requirements are as following to file tax return as the head of the house hold:
Hence, Reba is allowed to file tax return as the head of the household.
(c):
Amount of FICA taxes to be paid by Reba:
Particulars
Amount ($)
Salary received
38000
Social security @6.2% (38000 x 6.2%)
2356
Medicare @1.45% (38000 x 1.45%)
551
FICA taxes
2907
(d):
Particulars
Amount ($)
Amount ($)
Salary received
38000
Rental income
30000
Less: Rental expenses
19500
10500
Alimony received
14400
Received from mother
3000
Interest income from corporate bonds
2200
Interest income from Municipal bonds not taxable
Gross income
68100
Less: Medical expenses:
Insurance premiums
4795
Medical care expenses
1100
Prescription medicine
350
Non-prescription medicine is not allowed
Contact lenses for Heather
200
6445
Taxable income
61655
Tax on $61,655
Up to $13350
1335
From $13351 to $50800
5617.35
From $50801 to $61655
2713.5
Tax liability
9665.85
Federal income tax withheld by the employer
10000
Tax payment made by Reba
500
Total tax paid
10500
Tax refund to be made to Reba (10500 - 9665.85)
834.15
Note:
Income tax rate and slab for the head of the household
Income
Rate of tax
$0 to $13,350
10%
$13351 to $50800
15%
$50801 to $131200
25%
Particulars
Amount ($)
Salary received
38000
Social security @6.2% (38000 x 6.2%)
2356
Medicare @1.45% (38000 x 1.45%)
551
FICA taxes
2907