Calculate Lisa and Harry’s tax estimate (15%) using the 2014 1040 long form (filing jointly) and schedules A & B. What will be their adjusted gross income? How much will they have in exclusions? Will they take the standard deductions or itemize? What will be the amount of the deduction? What is the total amount of exemption they will qualify for? What will be their taxable income? Will they qualify for the child tax credit? If yes, for how much? What will their federal tax bill be?

Lisa and Harry’s information:

Annual Income - $90,000

Cars - $30,000

Furniture - $20,000

Mortgage - $90,000

Balance Remaining on Cars - $4,000

Utilities - $350 a month

Checking Account - $2,000

Savings Account - $4,000

IRA - $12,000 (Lisa)

401K -$50,000 (Harry)

Stocks - $30,000

Emergency Fund - $1500

529 Plan - $25,000

Credit Cards Bills - $550 a month

2 children (Ages 3 & 4)

Lisa earns $30,000 annually from a part-time home business. Harry’s annual salary is $60,000. They save about $7500 a year from their income.

They save approximately $7,500 a year. Lisa savings goes into an IRA at a local bank that doesn’t offer investment options but is tied to a savings vehicle with an annual yield of .45%. Harry on the other hand has money ($50k) in his employer sponsored 401k plan. He doesn’t like a lot of risk so he took the advice of someone he met at a local bar and had $15,000 of the funds allocated toward stocks, $25,000 in bonds, and another $10,000 in cash and cash equivalents. There’s another $30,000 in an investment portfolio that he inherited from his father.

To date, the they have accumulated a total of $124,500 of assets, not including $45,000 of home equity or the cars and furniture. Their assets include $1,500 in an emergency fund, $12,000 in an IRA for Lisa, $30,000 in other investments, and $50,000 in Harry’s 401k plan through his employer.

Lisa and Harry, 35 and 33, have now been married for 5 years and are considering life insurance. Lisa doesn’t have any coverage, while Harry has a $50,000 group policy at work. They have 2 young children, ages 3 and 4. Lisa earns $30,000 annually from a part-time home-based business. Harry’s annual salary is $60,000. From their income, they save approximately $7500 a year. The remainder goes toward expenses. The couple estimates that the children will be financially dependent for another 17 years. This includes college expenses which are estimated to be approximately $60,000 a year for the two of them. In preparation for a visit with their insurance agent they estimated the following expenses if Harry were to die:

Immediate needs at death - $25,000

Outstanding debt (Including mortgage repayment) – 94,000

Transitional funds for Lisa to expand her business and fully support the family - $30,000

College Expenses for both children - $240,000