Question
Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer
Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm while Jessie runs a craft business from their home. Jessies craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzies college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married-joint. Assume that the employer portion of the self-employment tax on Jessies income is $837. Joe and Jessie have summarized the income and expenses they expect to report this year as follows: Income: Joes salary $ 129,700 Jessies craft sales 18,460 Interest from certificate of deposit 1,710 Interest from Treasury bond funds 728 Interest from municipal bond funds 932 Expenditures: Federal income tax withheld from Joes wages $ 13,700 State income tax withheld from Joes wages 6,520 Social Security tax withheld from Joes wages 7,506 Real estate taxes on residence 6,320 Automobile licenses (based on weight) 322 State sales tax paid 1,210 Home mortgage interest 16,600 Interest on Masterdebt credit card 2,420 Medical expenses (unreimbursed) 1,750 Joes employee expenses (unreimbursed) 2,520 Cost of Jessies craft supplies 4,920 Postage for mailing crafts 151 Travel and lodging for craft shows 2,290 Self-employment tax on Jessies craft income 1,674 College tuition paid for Lizzie 5,900 Interest on loans to pay Lizzies tuition 3,320 Lizzies room and board at college 12,740 Cash contributions to the Red Cross 555 a. Determine Joe and Jessies AGI and taxable income for the year. (Round your intermediate calculations to the nearest whole dollar amount.)
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