The Akais just finished calculating their taxable income for their 2018 joint federal income tax return. It totaled $69,070 and showed no tax credits. Just prior to filing their return, the Akais realized that they had treated a $2,000 outlay as an itemized deduction, rather than correctly treating it as a $2,000 tax credit.

a. Use the tax rate schedule in Table 17.1 to calculate the Akais' tax liability and tax due on the basis of their original$69,070 estimate of taxable income.

b.How much taxable income will the Akais have if they correctly treat the $2,000 as a tax credit rather than a tax deduction?

c.Use your findings in part (a) to calculate the Akais' tax liability and tax due after converting the $2,000 tax deduction to a tax credit.

d.Compare and contrast your findings in parts (a) and (c). Which would you prefer, a tax deduction or an equal-dollar-amount tax credit? Why?

In order to calculate income tax due, refer to the table below showing the relevant tax rates for taxpayers filing jointly.

Taxable Income
Tax Rates	Joint Returns
10%	$0 to $19,050
12%	$17,401 to $77,400
22%	$70,701 to $165,000
24%	$142,701 to $315,000
32%	$217,451 to $400,000
35%	$400,001 to $600,000
37%	$600,001 or more

a. Based upon the original estimate, the Akais' tax liability and tax due for 2018 is $ enter your response here.

(Round to the nearest cent.)

Part 2

b. If they correctly treat the $2,000 as a tax credit rather than a tax deduction, the Akais' taxable income is $ enter your response here.

(Round to the nearest dollar.)

Part 3

c. Based upon the correct estimate, the Akais' tax liability for 2018 is $ enter your response here.

(Round to the nearest cent.)

Part 4

Based upon the correct estimate, the Akais' tax due for 2018 is $ enter your response here.

(Round to the nearest cent.)

Part 5

d.Compare and contrast your findings in parts (a) and (c). Which would you prefer, a tax deduction or an equal-dollar-amount tax credit? Why? (Select the best answer below.)

A. I would prefer a tax deduction over an equal-dollar-amount tax credit because the tax deduction results in a greater overall reduction in taxes due.

B. I would prefer a tax credit over an equal-dollar-amount tax deduction, because a tax credit reduces the overall tax obligation on a dollar-for-dollar basis, resulting in a greater overall reduction in taxes due.

C.I would prefer a tax deduction over an equal-dollar-amount tax credit because tax credits do not reduce taxes on a dollar-for-dollar basis.

D.I would prefer a tax credit over an equal-dollar-amount tax deduction because the tax deduction reduces the overall tax on a dollar-for-dollar basis, resulting in a greater overall reduction in taxes due.