Mr. and Mrs. S have the following income items: Mr. S’s self-employment tax was

Question

Mr. and Mrs. S have the following income items:

Mr. S’s self-employment tax was $12,903. The couple had $13,050 itemized deductions. They provide 100 percent of the financial support of Mr. S’s 82-year-old mother, who resides in their home. Compute the couple’s income tax on a joint return. Assume the taxable year is 2017.

(Round your intermediate calculations and final answers to the nearest whole dollar amount.)

Mr. S’s Schedule C net profit $ 91,320 Mrs. S’s Schedule C net loss (7,480 ) Mrs. S’s taxable pension 12,300

Explanation / Answer

Step 1 )Gross Income

Schedule C Net profit $91320

Schedule C net loss (7480)

Taxable pension 12300

Gross Income $96140

2) Adjusted Gross Income = Gross Income -(1/2* Self employment tax)

= $96140-(12903/2)

=$89688

3) The higher of itemized deduction or standard deduction

Which is $12700 for 2017 for married filing jointly or $13050

Exemption : {($4050*2)+4050*1)}for both married couple and one for dependent relative = $12150

4) Taxable Income

AGI $89688

Less Itemized Deduction (13050)

Less Exemptions (12150)

Taxable Income $64488

5)Tax liability : Using the tax schedule for 2017 for married and filing together

for $64488 which falls in the 15% range of ($18650-75900)

= 15%($64488-$18650) + $1865

= $6875.7+$1865

= $8740.70 or $8741

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