Question

Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine, Michael, and Candice). The couple received salary income of $100,000, qualified business income of $10,000 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $200,000 and they sold it for $250,000. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $16,500 of itemized deductions, and they had $3,550 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice is 18 years of age, the Jacksons may claim a child tax credit for other qualifying dependents for Candice. use 2019

Answer 1

Answer -

Computation of Jacksons' (Tax Refund) / Tax Due for Tax Year 2019

	Description	Explanation	Amount ($)
(1)	Gross income	Salary income + Qualified business income = $100000 + $10000 Note - Gain on sale of home is excluded.	110000
(2)	For AGI deductions	-	0
(3)	Adjusted gross income	Same as gross income	110000
(4)	Standard deduction	Standard deduction for Married, filing jointly	24400
(5)	Itemized deductions	Given in question	16500
(6)	Greater of standard deduction or itemized deductions	Greater of: (4) or (5)	24400
(7)	Deduction for qualified business income	$10000 * 20%	2000
(8)	Taxable income	(3) - (6) - (7) = $110000 - $24400 - $2000	83600
(9)	Income tax liability	Refer working note - (1)	10109
(10)	Child tax credit	$2000 per qualifying child and $500 per qualifying dependent. = ($2000 * 3) + ($500 * 1)	6500
(11)	Tax withholding	Given in question	3550
Tax Due		(9) - (10) - (11) = $10109 - $6500 - $3550	59

# Working note - (1) - Computation of Jacksons' Tax Liability for Tax Year 2019 -

	Tax Rate	Taxable Income ($)	Calculation	Amount ($)
I.	10%	0 - 19400	$19400 * 10%	1940
II.	12%	19401 - 78950	($78950 - $19400) * 12%	7146
III.	22%	78951 - 168400	($83600 - $78950) * 22%	1023
Income tax liability			I + II + III	10109