Martin S. Albert (Social Security number 111-11-1111) is 39 years old and is married to Michele R. Albert (Social Security number 123-45-6789). The Alberts live at 512 Ferry Road, Newport News, VA 23601. They file a joint return and have two dependent children, Charlene, age 16, and Jordan, age 18. Charlenes Social Security number is 123-45-6788, and Jordans Social Security number is 123-45-6787. In 2023, Martin and Michele had the following transactions:

Michele received $130,000 in salary from Red Steel Corporation, where she is a construction engineer. Withholding for Federal income tax was $10,750. The amounts withheld for FICA taxes were as follows: $7,440 ($120,000 6.2%) for Social Security and $1,740 ($120,000 1.45%) for Medicare. Michele worked in Mexico from January 1, 2022, until February 15, 2023. Her $120,000 salary for 2023 includes $18,000 she earned for January and one-half of February 2023 while working in Mexico.

Martin and Michele received $400 interest on Montgomery County (Virginia) school bonds.

Martin received $2,300 interest from a Bahamian bank account.

Michele received 50 shares of Applegate Corporation common stock as a stock dividend. The shares had a fair market value of $2,500 at the time Michele received them, and she did not have the option of receiving cash.

Martin and Michele received a $1,200 refund on their 2022 Virginia income taxes. Their itemized deductions in 2022 totaled $34,000 and included state taxes of $7,400.

Michele paid $6,600 alimony to her former husband, Benjamin P. Morgan (Social Security number 123-45-6786). The divorce was finalized in March 2016.

Martin and Michele kept the receipts for their sales taxes paid of $1,100.

Martin and Micheles itemized deductions were as follows:

State income tax paid and withheld totaled $5,100.

Real estate taxes on their principal residence were $3,700.

Mortgage interest on their principal residence was $2,500.

Part 1Tax Computation

Compute the Alberts net tax payable (or refund due) for 2023.

Part 2Tax Planning

The Alberts are considering buying another house. Their house mortgage payments would increase by $500 (to $1,500) per month, which includes a $250 increase in interest and a $100 increase in property tax. The Alberts would like to know how much the mortgage payments would increase net of any change in their income tax. Write a letter to the Alberts that contains your advice.