Complete the 2021 Schedule A

Scenario

John and Julia are married and have two children. John works as a graphic designer for a design firm and Julia is a massage therapist. She is an employee and is not self-employed. They own a vacation home in Colorado that is used 30% for personal purposes (assume it is used 70% as a rental property and the income and expenses related to the rental have been reported on Schedule E (meaning that they appear before AGI)). During the year they receive $800 in reimbursements from their medical plan and report $5,000 of investment income (included in AGI). They contributed stock, with a fair market value of $3,350, which they acquired in 2005 at a cost of $1,800 to Ohlone College. Their gambling winnings for the year were $1,500 and are included in their adjusted gross income. Their adjusted gross income for the year is $103,000 and they provide you with the following data:

Automobile insurance 1,450

Homeowners insurance 625

Life insurance 1,200

Disability insurance 525

Health insurance premiums (paid on an after-tax basis) 1,950

Country club dues 1,800

Gym membership 800

Hospital bills 5,100

Doctor bills 1,475

Aroma Therapy 700

Dentist bills 3,710

Prescription medications 325

Over-the-counter medications 470

State taxes withheld 8,350

Property taxes (ad valorem) 500

Investment interest 1,800

Mortgage interest (primary residence) 7,100

Real estate taxes (primary residence) 2,340

Mortgage interest (vacation residence - the full amount, $1638 has already been deducted on Sch E) 2,650

Real estate taxes (vacation residence - the full amount, $1274 has already been deducted on Sch E) 1,820

Charitable contributions (cash; they have receipts) 8,100

Charitable contribution (clothes at FMV) 250

Subscriptions to investment journals 150

Dues to professional organizations 400

Tax prep fees 550

Investment advice 750

Parking at work 250

Safe-deposit box 750

Gambling losses 0

Unreimbursed employee business expenses (the full amounts paid and unreimbursed)

Airfare 500

Lodging 400

Meals 290

Entertainment 300

Incidentals 250.

Multiple Choice 24. Will they itemize or use the standard deduction?

Multiple-choice options: itemize, standard deduction

25. T/F - They can deduct all of their state taxes paid as an itemized deduction. 26. T/F - They can deduct all of their medical expenses paid as an itemized deduction.

27. By how much are their charitable contributions limited? Are they allowed to deduct the entire amount of contributions they made, or what amount that they contributed are they NOT allowed to deduct? a. $0 b. $20,387

c. $30,300 d. $101,000

28. What would reduce their tax liability more? a. An additional $500 state taxes paid. b. An additional $200 mortgage interest paid. c. a and b are both the same.

Can you complete Schedule A 2021 and answer the questions?