Answer Page for Case Study #2 Put a Yes or NO next to each item from Ally's list of Potential deductions 1. United Calvary Church contribution $2,400 2. Used clothing donated to Goodwill $250 3. Interest paid on a car loan $980 4. Interest paid on credit card bills $204 5. out of pocket medical expense $6,460 6, Home mortgage interest $7,040 7. General sales tax paid $430 8. Personal property taxes for her car $300 9. Real estate taxes $1,400 10. Local income taxes withheld $702 11. Tax preparation fees $540 MacBook Air 12 Does Ally get a tax credit for both children Fill in the Blank 13 On Ally's 1040, what amount goes on Line 1? (wages salaries, tips) 14. Line 2b. Tax exempt interest 15. Line 3b. ordinary dividends 16. Line 6 - what other income would Ally claim? (see schedule 1) 17. Line 7 - what is Ally's adjusted Gross Income? MacBook Air 17. Line 7 - what is Ally's adjusted Gross Income? Now lets look at the Schedule A - Itemized Deductions 18. Line 1 for medical / dental expenses is $6460, enter the income you came up with from line 7 on the 1040, and multiply it by 7.5% to find amount that can be deducted. Were you able to enter the amount or did you enter a zero? 19. How much can Ally deduct in state and local taxes for line 5a? 20. In line 8a, how much can Ally deduct for home mortgage interest? 21. How much can Ally deduct for gifts to charity? 22. Will Ally use the itemized or standard deduction? 23. Back to the 1040, how much credit will Ally get for the child tax credit? 24. Does Ally pay tax on her alimony received? 25. Does Ally pay tax on any child support received? MacBook Air CASE STUDY 2 Ally, Sophie and Carson Davidson Ally Davidson is 38 years old and divorced. Her social security number is 888.66.4444. Her daughter, Sophie (who is 19 years old), has a SSN of 333.55.7777. Her son, Carson (who is 15 years old, has a SSN of 999 88 7777. Sophie and Carson both lived with Ally for the entire year at 2 Surfside, Seal Beach CA Ally provided more than half of Sophie and Carsons support and paid all of the cost of keeping up their home. Ally eamed $75,500 as a nurse. Federal income tax withheld from her salary was $3,700. She received $100 in interest from the Bank of America and $380 in ordinary dividends from her Apple Stock. Her ex husband paid her $20,000 in alimony and $16,000 in child support. Even though Ally received a refund from her federal taxes last year, she had to pay $460 in state income taxes. Ally's only retirement program is a hospital pension that she does not contribute to; she is given a contribution from the pension. Sophie just started college this past year and had $1,600 in qualifying expenses between the Spring and Fall semesters. Ally has listed as potential itemized deductions for this year the following: bebused on her schedule A Please record MacBook Air 80 14 F5 F6 FB 19 $ 4 % 5 6 & 7 8 9 0 PayU SLLOWINNO she does not contribute to; she is given a contribution from the pension. Sophie just started college this past year and had $1,600 in qualifying expenses between the Spring and Fall semesters. Ally has listed as potential itemized deductions for this year the following: I would like you to determine which of these can be used on her schedule A. Please record your answers on the answer sheet, which you will then upload into drop box. United Calvary Church contribution $2,400 Used clothing donated to Goodwill $250 . Interest paid on a car loan $980 Interest paid on credit card bills $204 out of pocket medical expense $6,460 Home mortgage interest $7,040 General sales tax paid $430