Section PF.5 – Practice Problems

For problems 1-4, Find the gross income, adjusted gross income, and taxable income.

1.

Illustrator, single male, one dependent daughter:

Gross income:
$24,451

Adjustments:
$600 tax-deferred retirement plan (IRA – Individual Retirement Account)

Deductions:
$8500 mortgage interest
$3800 property taxes
$2700 charitable contributions

Tax credit:
$800

2.

Police Records Officer, married filing separately with two dependent children

Gross income:
$92,187 for employment
$950 in interest from a savings account

Adjustments:
$1800 tax-deferred savings plan

Deductions:
$5608 state income taxes
$875 contribution to charity

Tax credit:
$0

3.

Paralegal and Human Service Assistant, married couple filing jointly, three dependents

Gross income:
Paralegal $59,345
Human Service Assistant $37,735

Adjustments:
$4800 tax-deferred savings plan

Deductions:
$8105 interest on a home mortgage
$2525 property taxes
$1100 charitable contributions

Tax credit:
$0

4.

Sound Engineering Technician, unmarried head of household, two dependents

Gross income:
$49,645
$230 in interest from a savings account

Adjustments:
$2100 tax-deferred retirement plan (401(k) – Employer Sponsored plan)

Deductions:
$5000 charitable contributions
$5000 interest on a home mortgage
$10,000 medical expenses
$1000 state taxes

Tax credit:
$550

For problems 5-9, Use the sample tax rates table to compute the income tax owed.

5. A single man, office machine repairer, with a taxable income of $36,323.

6. A head of household, marketing manager, with a taxable income of $117,810.

7. A married couple filing jointly, criminal investigators and owns rental properties, with a taxable income of $380,900 and a $2800 tax credit.

8. A married woman but filing separately, working as an archivist, with a taxable income of $50,783 and a $750 tax credit.

9. A single woman, kindergarten special education teacher, with a taxable income of $50,383 and a $1900 tax credit.

For problems 10-13, Calculate the income tax owed.

10. Suppose your neighbor, an equal opportunity representative, earned wages of $72,179, received $1790 in dividends and long-term capital gains, and contributed $3700 to a tax-deferred retirement plan. He filed head of household and is entitled to a personal exemption and the same exemption for his son.  The interest on his home mortgage was $10,235, he contributed $4,000 to charity, and he paid $760 in state taxes.

11. Svetlana is married, works as a public high school teacher, earned wages of $63,900, received $495 in interest from a savings account. She contributed $2400 to a tax-deferred retirement plan, 403(b), and paid $1900 in interest on student loans.  She is entitled to a personal exemption for herself and her three children.  The interest on her home mortgage was $6,900, she contributed $3,100 to charity, and he paid $2,150 in state taxes.  Svetlana also gave a tax credit of $800 for her children’s school. Svetlana is married and filing separately.

12. Rhiannon is employed as a police detective and earned wages of $98,900. She contributed $1200 to a tax-deferred retirement plan.  She is filing single and is entitled to personal exemption. She had itemized deductions totaling $12,750.

13. Viridiana and Micah are married and filed jointly. Viridiana earned $105,800 as a real estate broker and Micah earned $80,400 as an advertising manager. They earned $24,000 from a rental property they own, and they received $3650 in savings interest. They claimed five exemptions for themselves and three children.  They contributed $3240 to their tax-deferred retirement plans, and their itemized deductions total $28,610.  They also gave a tax credit to her niece’s private school for $1000.