Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine, Michael, and Candice). The couple received salary income of $100,000 and qualified business income of $10,000 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $200,000 and they sold it for $250,000. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $16,500 of itemized deductions, and they had $3,550 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice is 18 years of age, the Jacksons may only claim the child tax credit for other qualifying dependents for Candice. (Use the tax rate schedules.)

Solution:

(1) Net sales $110,000 $100,000 Wage benefit + $10,000 QBI.  

Winning $50,000 home prices is exempt.  

(2) Deductions for AGI 0.

(3) Adjusted gross income 110,000 (1) − (2)

(4) Regular deduction 24,000 Married registration together.

(5) 16,500 deductions, which have been recorded.

(6) Greater regular allowances or comprehensive allowances 24,000 24,000 Greater of (4) or (5)

(7) Deduction for qualified business income 2,000 $10,000 QBI × 20%

(8) Total deductions from AGI 26,000 (6) + (7)

(9) Taxable income $ 84,000 (3) − (8)

(10) Income tax liability $ 10,359 (84,000 - 77,400) × 22% + 8,907 (see tax rate schedule for married filing jointly).

(11) Other taxes 0

(12) Total tax $ 10,359 (10) + (11)

(13) Credits (6,500 ) Child credits for four children (3 ×$2,000 + 1 × $500)

(14) Prepayments (3,550 )

Tax due with return $ 309 (12) + (13) + (14)

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