Question

Problem 2-25 The Benjamin family had wage earnings of $198,000 in 2015. They received interest of $4,500 on corporate bonds and $1,500 on bonds issued by the state. Their dividend income was $500, and they had a $1,000 long-term capital gain on the sale of securities. They paid real estate taxes of $1,450 and state income tax of $3,000, and they donated $550 to their church. They paid interest of $8,000 on their home mortgage. They have one dependent child The exemption rate is $4,000 per person. Capital gains tax rate is 15% Single Individuals Income ($ Married Couples Filing Jointly Rate (o Rate (% Income 0-9,225 9,225-37,450 37,450-90,750 90,750-189,300 189,300-411,500 411,500-413,200 Over 413,200 10 0-18,450 18,450-74,900 74,900-151,200 151,200-230,450 230,450-411,500 411,500-464,850 Over 464,850 10 15 15 25 25 28 28 35 35 39.6 39.6 What was their tax liability for 2015 assuming they file jointly as a married couple? Use the Personal Tax Schedules given above. Round the answer to the nearest cent. 37,321.5 X

Answer 1

Answer:

Year 2015:

Filing status: MFJ

Income:

Wages = $198,000

Interest on corporate bond = $4,500

Interest of state bond is exempt

Dividend income = $500

Long Term capital gain = $1,000

Total Income = 198000 + 4500 + 500 + 1000 = $204,000

Itemized Deductions:

Real estate taxes = $1450

State Income tax = $3,000

Donation to church = $550

Interest on home mortgage = $8,000

Total itemized deduction = 1450 + 3000 + 550 + 8000 = $13,000

Standard deduction for MFJ for 2015 = $12,600

As standard deduction is smaller it is better to take itemized deduction.

Personal exemption = 4000 * 3 = $12,000

Taxable Income =204000 - 13000 - 12000 = $179,000

Tax liability = $178,000 at ordinary rates and $1,000 at 15%

= 18450 * 10% + (74900 -18450) * 15% + (151200 - 74900) * 25% + (178000 - 151200) * 28% + 1000 * 15%

= $37,041.50

$37,041.50