Alice and Bruce are planning some significant changes for 2019. They have provided you with the following information and asked you to project their taxable income and tax liability for 2019. Assume that the Byrds will itemize their deductions next year.

The Byrds will invest the $1,600,000 of life insurance proceeds in short-term certificates of deposit (CDs) and use the interest for living expenses during 2019.

They expect to earn interest of $32,000 on the CDs.

Bruce has been promoted to regional manager, and his salary for 2019 will be $88,000.

He estimates that state income tax withheld will increase by $4,000 and the Social Security tax withheld will be $5,456.

Alice, who has been diagnosed with a serious illness, will take a leave of absence from work during 2019. The estimated cost for her medical treatment is $15,400, of which $6,400 will be reimbursed by their insurance company in 2019. Their medical insurance premiums will increase to $9,769.

Property taxes on their residence are expected to increase to $5,100.

The Byrds' home mortgage interest expense and charitable contributions are expected to be unchanged from 2018.

John will graduate from college in December 2018 and will take a job in New York City in January 2019. His starting salary will be $46,000.

In 2019, the deduction for taxes on Schedule A are limited to $10,000 and the medical expenses are reduced by 10% of AGI.

Assume that all of the information reported in 2018 will be the same in 2019 unless other information has been presented above. Use the 2018 Tax Rate Schedules.

Provide the following that would be reported on the Byrds' Tax Planning For 2018. If required, round any computations to the nearest dollar.

1. Calculate the Byrds' projected itemized deductions for 2018:

2. Calculate the Byrds' taxable income:

3. Calculate the Byrds' related tax liability for 2018:

2018 Tax Rate Schedules

Use the 2018 Tax Rate Schedules to compute the tax.

Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amount listed in the tables. This variation occurs because the tax for a particular income range in the tax table is based on the midpoint amount.

2018 Tax Rate Schedules
SingleSchedule X											Head of householdSchedule Z
If taxable income is: Over		But not over		The tax is:				of the amount over			If taxable income is: Over		But not over		The tax is:				of the amount over
$0		$9,525		. . . . . .		10%		$0			$0		$13,600		. . . . . .		10%		$0
9,525		38,700		$952.50	+	12%		9,525			13,600		51,800		$1,360.00	+	12%		13,600
38,700		82,500		4,453.50	+	22%		38,700			51,800		82,500		5,944.00	+	22%		51,800
82,500		157,500		14,089.50	+	24%		82,500			82,500		157,500		12,698.00	+	24%		82,500
157,500		200,000		32,089.50	+	32%		157,500			157,500		200,000		30,698.00	+	32%		157,500
200,000		500,000		45,689.50	+	35%		200,000			200,000		500,000		44,298.00	+	35%		200,000
500,000		. . . . . .		150,689.50	+	37%		500,000			500,000		. . . . . .		149,298.00	+	37%		500,000
Married filing jointly or Qualifying widow(er)Schedule Y-1											Married filing separatelySchedule Y-2
If taxable income is: Over		But not over		The tax is:				of the amount over			If taxable income is: Over		But not over		The tax is:				of the amount over
$0		$19,050		. . . . . .		10%		$0			$0		$9,525		. . . . . .		10%		$0
19,050		77,400		$1,905.00	+	12%		19,050			9,525		38,700		$952.50	+	12%		9,525
77,400		165,000		8,907.00	+	22%		77,400			38,700		82,500		4,453.50	+	22%		38,700
165,000		315,000		28,179.00	+	24%		165,000			82,500		157,500		14,089.50	+	24%		82,500
315,000		400,000		64,179.00	+	32%		315,000			157,500		200,000		32,089.50	+	32%		157,500
400,000		600,000		91,379.00	+	35%		400,000			200,000		300,000		45,689.50	+	35%		200,000
600,000		. . . . . .		161,379.00	+	37%		600,000			300,000		. . . . . .		80,689.50	+	37%		300,000