Reba and Heather Dixon

Reba Dixon is a fifth-grade school teacher who earned a salary of $38,000 in 2021. She is 45 years old and has been divorced for four years (since October 2016). She received $1,200 of alimony payments each month from her former husband. Reba also rents out a small apartment building. This year Reba received $50,000 of rental payments from tenants and she incurred $19,500 of expenses associated with the rental.

Reba and her daughter Heather (20 years old at the end of the year) moved to Georgia in January of this year. Reba provides more than one-half of Heathers support. They had been living in Colorado for the past 15 years, but ever since her divorce, Reba has been wanting to move back to Georgia to be closer to her family. Luckily, last December, a teaching position opened up and Reba and Heather decided to make the move. Reba paid a moving company $2,010 to move their personal belongings, and she and Heather spent two days driving the 1,426 miles to Georgia.

Reba rented a home in Georgia. Heather decided to continue living at home with her mom, but she started attending school full time in January and throughout the rest of the year at a nearby university. She was awarded a $3,000 partial tuition scholarship this year, and Reba helped out by paying the remaining $500 tuition cost. If possible, Reba thought it would be best to claim the education credit for these expenses.

Reba likes to paint. She often goes to the country and paints landscapes. Once a month she attends an art show where she is able to sell her paintings. In 2021 she had receipts of $2,500 selling paintings. She had expenses of $2,200 for supplies (paint, canvas, brushes, etc). Show fees were $300. She also drove 700 miles going to the shows. (Note that the standard mileage rate for 2021 was 56 cents per mile.)

Reba wasn't sure if she would have enough items to help her benefit from itemizing on her tax return. However, she kept track of several expenses this year that she thought might qualify if she was able to itemize. Reba paid $5,800 in state taxes and $12,500 in charitable contributions during the year. She also paid the following medical-related expenses for herself and Heather:

Insurance premiums $7,952

Medical care expenses $1,100

Prescription medicine $ 350

Nonprescription medicine $ 100

New contact lenses for Heather $ 200

A few years ago, Reba acquired several investments with her portion of the divorce settlement. This year she reported the following income from her investments: $2,200 of interest income from corporate bonds and $1,500 interest income from the City of Denver municipal bonds. Overall, Rebas stock portfolio appreciated by $12,000, but she did not sell any of her stocks.

Heather reported $6,200 of interest income from corporate bonds she received as gifts from her father over the last several years. This was Heathers only source of income for the year.

Reba had $10,000 of federal income taxes withheld by her employer. Heather made $1,000 of estimated tax payments during the year. Reba did not make any estimated payments. Assume Reba received the correct advance payment for her 2021 individual recovery credit.

Please complete 2021 returns for Reba and, if needed, Heather