John and Nina Hartwick, married 14 years, have a 10-year-old daughter, Rita. Eight years ago, they purchased a home on which they owe a mortgage of $180,000. The home is appraised at $220,000. They also owe $8,000 on a 2013 Kia Sportage. The automobile is worth $12,000. They own a second car (2012 Kia Optima) which has a value of $6,000 and is debt-free. All of their personal property (furniture, appliances, etc.) (value $15,000) has no separate debt since they bought with available cash and the VISA credit card. They owe $18,120 on a VISA credit card (21.99% interest). The credit card has a credit limit of $20,000. Nina is employed as a registered nurse and makes $85,000 a year. They owe $6,000 to University Lake School for Ritas private school tuition. John works from home as a part-time customer service representative and earns $22,000 a year. Their combined monthly take-home pay after deductions for taxes, their portion of employer-sponsored health and dental insurance, and Ninas Roth 401(k) is $6,200. Nina is eligible for her companys Roth 401(k) and contributes 1.5% of her salary. Her employer will match 100% up to 3% of her contributions. Johns company does not offer a 401(k). About six months ago, the Hartwicks had what they now describe as a financial meltdown. It all started one Monday afternoon when the transmission on their second car had to be replaced. Although they thought it would be an easy fix, the mechanic told them the transmission would need a complete overhaul. Unfortunately, the warranty on the automobiles drive-train component was for 5 years or 100,000 miles. Since this car was over 5 years old, they would have to pay for the repair, and the mechanic said it would cost about $2,100 to rebuild the transmission. They thought about buying a new car, but they did not think they could afford two car payments. At the time, they had about $3,500 in their savings account, which they had been saving for a summer vacation. But now they had to use their vacation money to fix the transmission, leaving $1,400 in their savings account. They have $2,000 in their checking account. Johns Traditional IRA is valued at $41,000, and it is invested in a Certificate of Deposit that earns 3% interest per year. Ninas Roth 401(k) has a value of $22,500. For the Hartwicks, the fact that they did not have enough money to take a vacation was a wake-up call. They realized they were now in their mid-30s and had serious cash problems. According to John, We do not waste money to do the things we want to do. But according to Nina, The big problem is that we never have enough money to start an investment program that could pay for our daughters education or fund more money into our retirement account. They would both like to retire when they reach the age of 65 They decided to take a big first step in an attempt to solve their financial problems. They began by examining their monthly expenses for the past month. See page 3 for cash inflows and outflows. Once the Hartwicks realized they have a $250 surplus each month, they plan on replacing the $2,100 taken from their savings account to pay for repairing the transmission. Now it was time to take the next step. Please note that this is a comprehensive assessment from various chapters.

Questions 1.

. Determine the Hartwicks taxable income, total federal tax liability, average tax rate, and marginal tax rate for 2018. Their itemized deductions are lower than their standard deduction. John contributed $2,400 to a deductible Traditional IRA. The child tax credit for Rita is $2,000.