South-Western Federal Taxation 2019 Edition. Chapter 5, Page 42-43, Number 59.

Martin S. Albert (Social Security # 111-11-1111) is 39 years old and is married to Michele R. Albert (Social Security #123-45-6789). The Albert's live at 512 Ferry Road, Newpoert News, VA 23601. They file a joint return and have two dependent children, Charlene, age 17, and Jordan, age 18. Charlene's Social Security number is 123-45-6788 and Jordan's Social Security number is 123-45-6787. In 2018, Martin and Michele had the folloiwing transactions:

A) Martin received $120,000 in salary from Red Steel Corporation, where he is a construction engineer. Withholding for Federal income tax was $10,750. The amounts withheld for FICA taxes were as follows: $7,049 ($113,700*6.2%) for Social Security and $1,740 ($120,000*1.45%) for Medicare. Martin worked in Mexico from January 1, 2017, until February 15, 2018. His $120,000 salary for 2018 includes $18,000 he earned for January and one-half of February 2018 while working in Mexico.

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

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

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

E) Martin and Michele received a $1,200 refund on their 2017 income taxes. Their itemized deductions in 2017 totaled $14,000.

F) Martin paid $6,600 alimony to his former wife, Rose T. Morgan (Social Security # 123-45-6786). The divorce was finalized in 2015.

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

H) Martin and Michele's 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 $5,000.

Cash contributions to the church totaled $2,800.

Part 1: Tax Computation. Compute the Albert's net tax payable (or refund due) for 2018.

Part 2: Tax planning. The Albert's 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 any change in their income tax. Write a letter to the Alberts that contains your advice.