Posted: February 23rd, 2022

TAX4001 Week 2 Writing Assignment – Part 2

It’s the finish of the tax-yr, and Kate and Sam Smith want your Help finishing pages 1 and 2 of Schedule 1040 and Schedule A. 

Kate Smith (SS # 555-55-5555)
Sam Smith (SS# 444-44-4444)

33 Oak Road Drive
San Diego, California  91911 

The taxpayers are 52 years outdated, file Married Submitting Collectively, and have two kids:

Elizabeth Smith (SS # 333-33-3333)
Jonathan Smith (SS# 222-22-2222). 

For this drawback, assume their gross revenue is $185,300.

This yr Kate bought a brand new job, and the Smiths moved to a brand new metropolis.  The brand new job was situated inside the similar state about 650 miles away from their outdated home.  Earlier than the transfer, the household went on a home searching journey that value them $700.  In addition they employed a shifting firm for $2,800.  On their solution to their new home they spent $50 on meals, and $75 on a lodge room.  In addition they stopped by an amusement park and spent $80 on tickets for the day.

The Smiths paid $12,000 in curiosity on their residence mortgage this yr, and $2,500 in actual property taxes on their new residence.  In addition they paid $1,200 in private bank card curiosity, and Kate paid $850 in curiosity on scholar loans.   

Sam was hospitalized with a coronary heart situation this yr, which required him to endure surgical procedure.  The Smiths incurred $25,000 in medical bills on account of Sam’s sickness.  Of this quantity, $18,000 was reimbursed by the insurance coverage firm.

Throughout the yr the Smiths contributed $1,500 money to the Salvation Military.  Earlier than their transfer, the household donated garments and furnishings that that they had bought for $650 to Goodwill.  On the time of donation the gadgets have been value $300.  In addition they gave some outdated child furnishings to their buddies that was valued at $150.

Sam Smith paid $200 in union dues for the yr, and the household pays $250 for tax return preparation companies.

Reply Key – After TCJA

Taxable revenue is $161,300, computed as follows:

                  Gross Earnings                                                                               $ 185,300
                 

      AGI                                                                   $185,300

                  Itemized Deductions:
                           Medical Bills                                                 zero
                           Mortgage Curiosity                                        12,000
                           Actual Property Taxes                                          2,500
                           Charitable Contributions                              1,800                            

                                                                                                 16,300**

                  Commonplace Deduction:

                           Married Submitting Collectively                                                           $24,000

                  Taxable revenue                                                                           $ 161,300
                              

Notes:

1.    Not one of the shifting bills are deductible.

2.    Scholar mortgage curiosity is just not deductible as a result of the Smith’s AGI exceeds the edge quantity of revenue.

three.    Private bank card curiosity is just not deductible.

four.    Medical bills don’t exceed the ground limitation of 10 % of AGI so are non-deductible.

5.    The Smith’s can deduct the $1,500 money donation, and the $300 of things contributed to Goodwill. They can’t deduct the furnishings given to their buddies.

6.    Union dues of $200 and tax return preparation charges of $250 are not deductible.

**  Complete itemized deductions are usually not as excessive as the usual deduction.  Subsequently, this yr the shopper ought to take the usual deduction.

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