Mark and Julie Smith are married, file a joint tax return and have two dependent children (ages 8 and 11). The Smith's income (loss) consisted of the following items:

• Salary 125,000
• Interest income 113
• Qualified dividend income 500
• Capital loss on sale of stock (held 9 months) (9,100)
• Passive income from limited partnership 10,000
• Sec. 1231 gain from limited partnership 2,000
• Rental real estate loss (4,200)¹

In addition, they incurred the following expenditures:

• Qualified medical expenses incurred 12,631
• Reimbursement from medical insurance company 1,000
• Unreimbursed employee business expenses 3,544
• Qualified home mortgage interest 9,800
• Credit card interest 650
• Interest on loan for personal auto 1,450
• Charitable contributions (all cash donations) 5,350
• State income tax paid 6,100
• Property taxes paid 6,250
• Federal income tax withheld during 2021 17,175
• FICA (social security) taxes withheld during 2021 9,563

Note1: The Smiths actively participate in the real estate activity and they own more than 10% of the activity.

Required:

1. Compute the Smiths taxable income (before their qualified business income (QBI) deduction).

2. Because home mortgage interest and property taxes are tax deductible, what is the Smiths net tax benefit of owning their home? Hint: Think about the standard deduction