VIPSolutionsMarc and Mikkel are married and file a joint tax retum. Marc and Mikkel earned salaries this year of $64,000 and $ 12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Marc contributed 52, 500 to a traditional individual retirement account, and Marc paid alimony to a prior spouse in the amount of $1,500 (under a divorce decree effective June 1, 2017). Marc and Mikkel have a 10-year old adopted son, Mason, who lived with then throughout the entire year. Thus, Marc and Mikkel are allowed to claim a $2,200 child tax credit for Mason. Marc and Mikkel paid $6,000 of expenditures that qualify as itemized deductions, and they had a total of 52, 500 in federal income taxes withheld from their paychecks during the year.
Question:
Marc and Mikkel are married and file a joint tax retum. Marc and Mikkel earned salaries this year of $64,000 and $ 12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Marc contributed 52, 500 to a traditional individual retirement account, and Marc paid alimony to a prior spouse in the amount of $1,500 (under a divorce decree effective June 1, 2017). Marc and Mikkel have a 10-year old adopted son, Mason, who lived with then throughout the entire year. Thus, Marc and Mikkel are allowed to claim a $2,200 child tax credit for Mason. Marc and Mikkel paid $6,000 of expenditures that qualify as itemized deductions, and they had a total of 52, 500 in federal income taxes withheld from their paychecks during the year.
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Asked by: Prakash
Created at: 2025-10-31 19:52:51
Asked by: Prakash
Created at: 2025-10-31 19:52:51
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# Tax Calculation for Marc and Mikkel (2023)
## 1. **Gross Income**
| Source | Amount |
|-----------------------|----------|
| Marc's Salary | $64,000 |
| Mikkel's Salary | $12,000 |
Municipal Bond Interest | $350 |
| Corporate Bond Interest | $500 |
| **Total** | |
- **Municipal bond interest** is **tax-exempt** and not included in gross income.
**Gross Income Calculation:**
\[
\$64,000 + \$12,000 + \$500 = \$76,500
\]
## 2. **Adjustments for AGI (Above-the-Line Deductions)**
- **Traditional IRA Contribution:** $2,500 (Marc)
- **Alimony Paid (divorce before 2019):** $1,500
\[
\$2,500 + \$1,500 = \$4,000
\]
## 3. **Adjusted Gross Income (AGI)**
\[
\$76,500 - \$4,000 = \$72,500
\]
## 4. **Deductions from AGI**
- **Greater of Standard or Itemized Deduction:**
- 2023 Standard Deduction for Married Filing Jointly: **$27,700**
- Itemized deductions: $6,000
**Use Standard Deduction: $27,700**
## 5. **Taxable Income**
\[
\$72,500 - \$27,700 = \$44,800
\]
## 6. **Tax Liability (Before Credits)**
### 2023 Tax Brackets (Married Filing Jointly)
- 10%: $ – $22,000
- 12%: $22,001 – $89,450
**Calculate tax:**
- 10% on first $22,000: $2,200
- 12% on next $22,800: $2,736
\[
\$2,200 + \$2,736 = \$4,936
\]
## 7. **Credits**
- **Child Tax Credit:** $2,200 (for Mason)
\[
\$4,936 - \$2,200 = \$2,736
\]
## 8. **Withholding and Refund/Balance Due**
- **Federal Income Tax Withheld:** $2,500
\[
\$2,500 (withheld) < \$2,736 (tax owed)
\]
**Amount Owed:**
\[
\$2,736 - \$2,500 = \$236
\]
---
## **Summary Table**
| Step | Amount |
|----------------------|---------|
| Gross Income | $76,500 |
| Adjustments | $4,000 |
| AGI | $72,500 |
| Std. Deduction | $27,700 |
| Taxable Income | $44,800 |
| Tax (before credits) | $4,936 |
| Child Tax Credit | $2,200 |
| **Tax Liability** | $2,736 |
| Withholding | $2,500 |
| **Amount Owed** | $236 |
---
## **Key Points**
- **Municipal bond interest** is excluded from taxable income.
- **Alimony paid** is deductible (divorce decree before 2019).
- **Traditional IRA contribution** is deductible.
- **Standard deduction** is higher than their itemized deductions.
- **Child tax credit** reduces their tax liability.
- They **owe $236** when filing their return.
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