Noah and Olivia Anderson are a married couple in their early 20s living in Dallas. Noah Anderson earned $73,000 in 2014 from his sales job. During the year, his employer withheld $9,172 for income tax purposes. In addition, the Andersons received interest of $350 on a joint savings account, $750 interest on tax-exempt municipal bonds, and dividends of $400 on common stocks. At the end of 2014, the Andersons sold two stocks, A and B. Stock A was sold for $700 and had been purchased four months earlier for $800. Stock B was sold for $1,500 and had been purchased three years earlier for $1,100. Their only child, Logan, age 2, received (as his sole source of income) dividends of $200 from Hershey stock.

Although Noah is covered by his company's pension plan, he plans to contribute $5,000 to a traditional deductible IRA for 2014. Here are the amounts of money paid out during the year by the Andersons:

Medical and dental expenses (unreimbursed)$200State and local property taxes831Interest paid on home mortgage4,148Charitable contributions1,360Total$6,539In addition, Noah incurred some unreimbursed travel costs for an out-of-town business trip:

1. Airline ticket$250Taxis20Lodging60Meals (as adjusted to 50% of cost)36Total$366Using the Andersons' information, determine the total amount of their itemized deductions. Assume that they'll use the filing status of married filing jointly, the standard deduction for that status is $12,400, and each exemption claimed is worth $3,950. Should they itemize or take the standard deduction?By look at a joint tax return for Noah and Olivia Anderson for the year ended December 31, 2014, that gives them the smallest tax liability. Use the appropriate tax rate schedule provided inExhibit 3.3to calculate their taxes owed.
2. How much have you saved the Andersons through your treatment of their deductions?
3. Do the Andersons need to file a tax return for their son.
4. Suggest some tax strategies the Andersons might use to reduce their tax liability for next year.

2014 Tax Rate Schedules Schedule X-If your filing status is Single If your taxable The tax is: income is: of the Over- But not amount Over- over- SO $9,075 -. . ... 10% SO 9,075 36,900 $907.50 + 15 9,075 36,900 89,350 5,081.25 + 25 36,900 89,350 186,350 18,193.75 + 28 89,350 186,350 405,100 45,353.75 + 33 186,350 405,100 406,750 117,541.25 + 35 405,100 406,750 . ..... 118,118.75 + 39.6 406,750 Schedule Y-1-If your filing status is Married filing jointly or Qualifying widow(er) If your taxable The tax is: income is: of the Over- But not amount over- $0 $18,150 - .."... 10% SO 18,150 73,800 $1,815.00 + 15 18,150 73,800 148,860 10,162.50 + 25 73,800 148,850 226,850 28,925.00 + 28 148,850 226,850 405,100 50,765.00 +33 226,850 405,100 457,600 109,587.50 + 35 405,100 457,600 ...... 127,962.50 + 39.6 457,600 Schedule Y-2-If your filing status is Married filing separately If your taxable The tax is: income is: of the Over- But not amount over- over- $9,075 . ..mmm. 10% SO 9,075 36,900 $907.50 + 15 9,075 36,900 74,425 5,081.25 + 25 36,900 74,425 113,425 14,462.50 + 28 74,425 113,425 202,560 25,382.50 + 33 113,425 202,550 228,800 54,793.75 + 35 202.550 228,800 ...... 63,981.25 + 39.6 228,800 Schedule Z-If your filing status is Head of household If your taxable The tax is: income is: of the But not amount Over- DVC- over- $12,950 = =.mmm. 10% SO 12,950 49,400 $1,295.00 + 15 12,950 49,400 127,560 6,762.50 + 25 49,400 127,550 206,600 26,300.00 + 28 127,550 206,600 405,100 48,434.00 + 33 206,600 405,100 432,200 113,939.00 + 35 405,100 432,200 123,424.00 + 39.6 432 200