Gary and Wendy are married and file a joint tax return claiming their seven children, ages 7, 9, 11, 13, 15, 17 and 19, as dependents. They pay Susan Smith $18,000 per year to care for their children after school and provide some house cleaning (you can ignore household employment taxes). 

Information for 2020 includes the following: 

AGI including Gary’s earned income of $420,000 and Wendy’s earned income of $50,000     $490,000 

Federal income taxes (all paid in 2020) 108,000 

State and local income taxes (all paid in 2020) 21,000 

Real estate property taxes 8,700 

Home mortgage interest 13,200 

Charitable contributions 7,900 

(You can ignore any possible additional medi-care tax and net investment income tax.) 

Starting with AGI, show each step of the tax formula and calculate taxable income, tax (before credits), child (after credits), tax due (refund due). 

The rows could be labeled as follows: 

AGI 

Less from AGI deductions 

Itemized Deductions 

Exemptions 

Taxable Income 

Tax on Taxable Income (before credits

) Less Tax Credits: 

Child Tax Credit 

Child & Dependent 

Care Credit Total 

Tax Credits + 100%