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 $849. Joe and Jessie have summarized the income and expenses they expect to report this year as follows:

Income:
Joes salary	$ 130,900
Jessies craft sales	18,580
Interest from certificate of deposit	1,830
Interest from Treasury bond funds	752
Interest from municipal bond funds	956
Expenditures:
Federal income tax withheld from Joes wages	$ 13,700
State income tax withheld from Joes wages	6,760
Social Security tax withheld from Joes wages	7,554
Real estate taxes on residence	6,560
Automobile licenses (based on weight)	346
State sales tax paid	1,330
Home mortgage interest	17,800
Interest on Masterdebt credit card	2,660
Medical expenses (unreimbursed)	1,870
Joes employee expenses (unreimbursed)	2,760
Cost of Jessies craft supplies	6,240
Postage for mailing crafts	163
Travel and lodging for craft shows	2,410
Self-employment tax on Jessies craft income	1,698
College tuition paid for Lizzie	6,140
Interest on loans to pay Lizzies tuition	3,560
Lizzies room and board at college	12,980
Cash contributions to the Red Cross	615

Comprehensive Problem 6-63 Part-b (Algo)

b. Complete page 1 of Form 1040 (through taxable income, line 15), Schedule 1, and Schedule A.