To determine whether the Youngs will use the standard deduction or itemized deductions, we need to compare the total of their itemized deductions to the standard deduction amount.
The standard deduction for married couples filing jointly in 2020 is $24,800.
The Youngs' total itemized deductions are $4,250 (property tax) + $6,250 (mortgage interest) + $1,750 (charitable contributions) + $12,500 (qualifying medical expenses) = $24,750.
Since the total of their itemized deductions ($24,750) is greater than the standard deduction ($24,800), the Youngs will use itemized deductions.
To calculate their taxable income, we subtract their itemized deductions from their combined income:
$47,000 - $24,750 = $22,250
The Youngs' taxable income is $22,250.
To calculate their tax owed, we need to use the tax brackets and rates for 2020. Let's assume their tax rate is 22% for simplicity.
Tax owed = Tax rate x taxable income
Tax owed = 0.22 x $22,250 = $4,895.00
The Youngs' tax owed is $4,895.
Since the Youngs have already paid $177 in taxes, we subtract this amount from their tax owed:
$4,895 - $177 = $4,718
The Youngs owe $4,718 in taxes.
Since their tax owed is positive, the Youngs owe taxes and do not receive a refund.
The Youngs are a married couple with a combined income of $47,000. They have one child with a health condition, and can claim the following deductions:
$4,250 in property tax
$6,250 in mortgage interest
$1,750 in charitable contributions
$12,500 in qualifying medical expenses
They can claim a $2000 child tax credit, and are eligible for an Earned Income Credit of $103.
Will the Youngs use the standard deduction or itemized deductions?
Standard
Itemized
Find the Youngs' taxable income. Round your answer to the nearest cent.
$
Compute the Youngs' tax owed. (Note that tax credits may make this number negative.) Round your answer to the nearest cent.
$
When they combine the withholding from their W-2s, the Youngs find that they have paid $177 in taxes in 2020. Do they owe taxes, or are they owed a refund?
Refund Due
Owes Taxes
Calculate the Youngs' taxes owed or refund. Round your answer to the nearest cent.
1 answer