1.

Carlys adjusted gross income in 2018 is $45,000. She had the following expenses:

Medical expenses

$4,500 (limited to amount over 7.5% of AGI)

Mortgage interest

$7,500

Property taxes

$1,800

State income tax

$1,000

Charitable gifts

$ 500

Should Carly take the standard deduction ($12,000) or itemize her deductions?

Answer: _______________

Explain:

2.

2. Eric has the following information for the current tax year. Assume he does not itemize.

Income from wages, $71,605

Interest earned on savings, $50

IRA contribution, $3,000

Checking account interest earned, $45

Standard deduction for Head of Household: $18,000

Tax credit for child care, $1,050

Child tax credit, $2,000

Filing status: Head of Household

Amount his employer already withheld for federal income tax, $4,825

Calculate

taxable income

:

(show how you arrived at the number)

3.

3. Assume Eric owes is $6,925 before the tax credits,

what is tax owed

after subtracting the tax

credits?

(show how you arrived at the number)

Hint: if you included tax credits in your #2

calculation, that is incorrect. Tax credits are subtracted from tax owed, not from taxable income.

4.Erics employer withheld $4,825 during the year. Calculate Erics refund: ______________