Help Sav Reba Dixon is a fifth-grade school teacher who earned a salary of $38,0

Question

Help Sav Reba Dixon is a fifth-grade school teacher who earned a salary of $38,000 in 2017. She is 45 years old and has been divorced for four years. She receives $1,.200 of alimony payments each month from her former husband. Reba also rents out a small apartment building. This year Reba received $30,000 of rental payments from tenants and she incurred $19,500 of expenses associated with the rental Reba and her daughter Heather (20 years old at the end of the year) moved to Georgia in January of this year. Reba provides more than one-half of Heather's support. They had been living in Colorado for the past 15 years, but ever since her divorce, Reba has been wanting to move back to Georgia to be closer to her family, Luckily, last December a teaching position opened up and Reba and Heather decided to make the move. Reba paid a moving company $2,010 to move their personal belongings, and she and Heather spent two days driving the 1,426 miles to Georgia During the trip, Reba paid $200 for lodging and $85 for meals. Reba's mother was so excited to have her daughter and granddaughter move back to Georgia that she gave Reba $3,000 to help out with the moving costs Reba rented a home in Georgia. Heather decided to continue living at home with her mom, but she started attending school full-time in January at a nearby university. She was awarded a $3,000 partial tuition scholarship this year, and Reba helped out by paying the remaining $500 tuition cost If possible, Reba thought it would be best to claim the education credit for these expenses. Reba wasn't sure if she would have enough items to help her benefit from itemizing on her tax return. However, she kept track of several expenses this year that she thought might qualify if she was able to itemize. Reba paid $2,800 in state income taxes and $6,500 in charitable contributions during the year. She also paid the following medical- related expenses for her and Heather: Prev 31 of 31!! Next th 10:2 4/4/2 rch

Explanation / Answer

(b):

Reba is allowed to file income tax return as the head of the household since al the conditions required to file tax return as the head of the household have been satisfied by her during the financial year. The requirements are as following to file tax return as the head of the house hold:

Hence, Reba is allowed to file tax return as the head of the household.

(c):

Amount of FICA taxes to be paid by Reba:

Particulars

Amount ($)

Salary received

38000

Social security @6.2% (38000 x 6.2%)

2356

Medicare @1.45% (38000 x 1.45%)

551

FICA taxes

2907

(d):

Particulars

Amount ($)

Amount ($)

Salary received

38000

Rental income

30000

Less: Rental expenses

19500

10500

Alimony received

14400

Received from mother

3000

Interest income from corporate bonds

2200

Interest income from Municipal bonds not taxable

Gross income

68100

Less: Medical expenses:

Insurance premiums

4795

Medical care expenses

1100

Prescription medicine

350

Non-prescription medicine is not allowed

Contact lenses for Heather

200

6445

Taxable income

61655

Tax on $61,655

Up to $13350

1335

From $13351 to $50800

5617.35

From $50801 to $61655

2713.5

Tax liability

9665.85

Federal income tax withheld by the employer

10000

Tax payment made by Reba

500

Total tax paid

10500

Tax refund to be made to Reba (10500 - 9665.85)

834.15

Note:

Income tax rate and slab for the head of the household

Income

Rate of tax

$0 to $13,350

10%

$13351 to $50800

15%

$50801 to $131200

25%

Particulars

Amount ($)

Salary received

38000

Social security @6.2% (38000 x 6.2%)

2356

Medicare @1.45% (38000 x 1.45%)

551

FICA taxes

2907

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