Question
PART 4 (1 point) Brandon and Kayla are married, and they are filing their 2019 federal income taxes jointly. Suppose $65 is deducted from each
PART 4
- (1 point) Brandon and Kayla are married, and they are filing their 2019 federal income taxes jointly. Suppose $65 is deducted from each of Brandons monthly paychecks for health insurance, and $90 is deducted from each of Kaylas monthly paychecks for health insurance. Recall from Part 2 of the project that Brandon and Kayla make contributions to their 401(k) plans with each of their monthly paychecks. When finding their annual taxable income, how much are the benefits?
- (1 point) When finding their annual taxable income, how much are the deductions? Note: Your answer should be the amount that they will claim for their deductions when they file their taxes. Here is the relevant information:
- For 2019, the standard deduction for a married couple filing jointly is $24,400.
- Brandon and Kayla paid $2,799.84 in state taxes and $3,538.56 in local taxes for 2019.
- Recall that Brandon and Kayla bought a house in Part 3 of the project, and the mortgage interest and property taxes are itemized deductions. For simplicity, assume that their first mortgage payment occurred on January 1, 2019.
- Recall that Brandon and Kayla have a student loan from Part 1 of the project. Student loan interest is a special case. They can claim the student loan interest deduction (Links to an external site.) even if they don't itemize their deductions. For simplicity, assume that their first student loan payment occurred on January 1, 2019.
- (2 points) Did Brandon and Kayla claim the standard deduction or itemize their deductions? Explain your decision, and show all of your calculations.
- (1 point) Find their annual taxable income for 2019. Use their salaries given in Part 2 of the project.
- (1 point) Calculate their federal income taxes for 2019. Use the following tax rate chart:
If Taxable Income Is: The Tax Is: Not over $19,400
10% of the taxable income
Over $19,400 but not over $78,950
$1,940 plus 12% of the excess over $19,400
Over $78,950 but not over $168,400
$9,086 plus 22% of the excess over $78,950
Over $168,400 but not over $321,450
$28,675 plus 24% of the excess over $168,400
Over $321,450 but not over $408,200
$65,497 plus 32% of the excess over $321,450
Over $408,200 but not over $612,350
$93,257 plus 35% of the excess over $408,200
Over $612,350
$164,709.50 plus 37% of the excess over $612,350
- (1 point) Suppose $179.70 was withheld from each of Brandon's monthly paychecks in 2019 for federal income taxes, and $347.70 was withheld from each of Kayla's monthly paychecks in 2019 for federal income taxes. Will they receive a refund or owe money to the IRS after they file their taxes?
- (1 point) How much money will they receive as a refund or have to pay to the IRS after they file their taxes?
- (2 points) Calculate their annual FICA taxes for 2019. Here is the relevant information:
- FICA taxes are based on their gross income health insurance deductions.
- Theyre required to pay FICA taxes on their 401(k) contributions, so you should NOT subtract their 401(k) contributions.
- FICA taxes include 6.2% for Social Security and 1.45% for Medicare.
Part 2 information as required below DO NOT SOLVE .
- (1 point) Brandon earns $37,200 per year, and he's paid monthly. His employer offers a 401(k) plan with 75% matching up to 8% of salary. What is the minimum amount of money that Brandon needs to contribute to his 401(k) each month to get the maximum contribution from his employer?
- (1 point) Suppose Brandon contributes the minimum amount of money to his 401(k) to get the maximum contribution from his employer. How much money will his employer contribute to his 401(k) each month?
- (2 points) Suppose Brandon contributes the minimum amount of money to his 401(k) each month to get the maximum contribution from his employer. Brandon is 27 years old, and he would like to retire when he's 66 years old. How much money will Brandon accumulate by the time he retires? Assume his investments will earn an interest rate of 6%, which is a reasonable inflation-adjusted return for a diversified investment portfolio.
- (1 point) Kayla earns $54,000 per year, and she's paid monthly. Kaylas employer offers a 401(k) plan, and her employer will contribute 6% of her salary provided Kayla contributes at least 8%. What is the minimum amount of money that Kayla needs to contribute to her 401(k) each month to get the contribution from her employer?
- (1 point) Suppose Kayla contributes the minimum amount of money to her 401(k) to get the contribution from her employer. How much money will her employer contribute to her 401(k) each month?
- (2 points) Suppose Kayla contributes the minimum amount of money to her 401(k) each month to get the contribution from her employer. Kayla is 27 years old, and she would like to retire when she's 66 years old. How much money will Kayla accumulate by the time she retires? Assume her investments will earn an interest rate of 6%, which is a reasonable inflation-adjusted return for a diversified investment portfolio.
- (2 points) Will Brandon and Kayla have enough money to retire when they're 66 years old? You should use the 4% Rule to determine how much money they can safely withdraw from their retirement accounts each year when they're retired. Then, you have to decide whether this amount of money is enough to pay for their annual living expenses in retirement. Provide reasons to support your decision.
PART 3 INFORMATION AS REQUIRED. DO NOT SOLVE
- (2 points) Brandon and Kayla have decided to buy a house for $310,000. They will make a 20% down payment, and they expect to be approved for a 30-year mortgage with an interest rate of 4.25%. Find their monthly payment.
- (1 point) Construct the first row of the amortization table for their mortgage. How much of their first payment goes toward interest? How much of their first payment goes toward principal? After making their first payment, what is the remaining balance?
- (1 point) Construct the second row of the amortization table for their mortgage. How much of their second payment goes toward interest? How much of their second payment goes toward principal? After making their second payment, what is the remaining balance?
- (2 points) Continue constructing the amortization table for their mortgage until you have completed 12 rows of the table. What is the total amount of interest that Brandon and Kayla will pay on their mortgage in the first year?
- (2 points) For the house that Brandon and Kayla have chosen, the annual property taxes are $2,928, and their homeowners insurance premium is $1,260 per year. Since they will make a 20% down payment, they do not have to pay PMI. Find their total PITI.
- (2 points) Do Brandon and Kayla pass the 28% and 36% tests to qualify for a mortgage? Recall that Brandon and Kayla have a car loan and a student loan from Part 1 of the project. Use their salaries given in Part 2 of the project. Show all of your calculations to justify your answers.
DO NOT SOLVE PART 2 and 3 ONLY SOLVE PART 4 QUESTIONS
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