Several years have gone by since Harry and Belinda graduated from college and started their working careers. They both earn good salaries. They believe that they are paying too much in federal income taxes. The Thomsons total income last year included Harrys salary of $73,000 and Belindas salary of $84,000. She contributed $3000 to her 401 (k) for retirement. She earned $600 in interest on savings and checking and $4000 interest income from the trust that is taxed in the same way as interest income from checking and savings accounts. Harry contributed $3000 into a traditional IRA.

(a) What is the Thomsons reportable gross income on their joint tax return?

(b) What is their adjusted gross income?

(c) What is the total value of their exemptions?

(d) How much is the standard deduction for the Thomsons?

(e) The Thomsons are buying a home that has monthly mortgage payments of $3000, or $36,000 a year. Of this amount, $32,800 goes for interest and real estate property taxes. The couple has a $14,000 in other itemized deductions. Using these numbers an Table 1 given below, calculate their taxable income and tax liability.

(f) Assuming they had a combined $22,000 in federal income taxes withheld, how much of a refund will the Thomsons receive?

(g) What is their marginal tax rate?

(h) List three additional ways that the Thomsons might reduce their tax liability next year.

Table 1. 2014 Taxable Income Brackets and Rates
Rate	Single Filers	Married Joint Filers	Head of Household Filers
10%	$0 to $9,075	$0 to $18,150	$0 to $12,950
15%	$9,076 to $36,900	$18,151 to$73,800	$12,951 to $49,400
25%	$36,901 to $89,350	$73,801 to $148,850	$49,401 to $127,550
28%	$89,351 to $186,350	$148,851 to $226,850	$127,551 to $206,600
33%	$186,351 to $405,100	$226,851 to $405,100	$206,601 to $405,100
35%	$405,101 to 406,750	$405,101 to 457,600	$405,101 to $432,200
39.6%	$406,751+	$457,601+	$432,201+