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. Based on their estimates, determine Joe and Jessies AGI and taxable income for the year and complete the Schedule 1 tax form. Assume that the employer portion of the self-employment tax on Jessies income is $831.

Joe and Jessie have summarized the income and expenses they expect to report this year as follows: Income: Joe's salary $129,100 Jessie's craft sales 18,400 Interest from certificate of deposit 1,650 716 Interest from Treasury bond funds Interest from municipal bond bunds 920 Expenditures: Federal income tax withheld from Joe's wages $13,700 State income tax with held from Joe's wages 6,400 7,482 Social Security tax withheld from Joe's wages Real estate taxes on residence 6,200 Automobile licenses (based on weight) 310 State sales tax paid 1,150 16,000 Home mortgage interest Interest on Masterdebt credit cared 2,300 1,690 2,400 4,260 Medical expenses (unreimbursed) Joe's employee expenses (unreimbursed) Cost of Jessie's craft supplies Postage for mailing crafts Travel and lodging for craft shows Self-employment tax on Jessie's craft income College tuition paid for Lizzie 145 2,230 1,662 5,780 3,200 Interest on loans to pay Lizzie's tuition Lizzie's room and board at college 12,620 Cash contributions to the Red Cross 525 SCHEDULE 1 OMB No. 1545-0074 (Form 1040) Additional Income and Adjustments to Income 2020 Department of the Treasury Attach to Form 1040, 1040-SR, or 1040-NR. Attachment Internal Revenue Service Go to www.irs.gov/Form 1040 for instructions and the latest information. Sequence No. 01 Name(s) shown on Form 1040, 1040-SR, or 1040-NR Your social security number Part Additional Income 1 2a 3 1 Taxable refunds, credits, or offsets of state and local income taxes 2a Alimony received b Date of original divorce or separation agreement (see instructions) 3 Business income or (loss). Attach Schedule C Other gains or losses). Attach Form 4797 5 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 6 Farm income or (loss). Attach Schedule F 7 Unemployment compensation.. 8 Other income. List type and amount 4 4 LOCO 7 8 9 10 11 12 13 14 15 9 Combine lines 1 through 8. Enter here and on Form 1040, 1040-SR, or 1040-NR, line 8 Part II Adjustments to Income 10 Educator expenses. 11 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 12 Health savings account deduction. Attach Form 8889 13 Moving expenses for members of the Armed Forces. Attach Form 3903 14 Deductible part of self-employment tax. Attach Schedule SE 15 Self-employed SEP, SIMPLE, and qualified plans 16 Self-employed health insurance deduction. 17 Penalty on early withdrawal of savings 18a Alimony paid. b Recipient's SSN c Date of original divorce or separation agreement (see instructions) 19 IRA deduction. 20 Student loan interest deduction 21 Tuition and fees deduction. Attach Form 8917 22 Add lines 10 through 21. These are your adjustments to income. Enter here and on Form 1040, 1040-SR, or 1040-NR, line 10a For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71479F 16 17 18a 19 20 21 | 22 Schedule 1 (Form 1040) 2020