FCS 3450 Homework 4

1.   Thomas Franklin arrived at the following tax information:

Gross salary, $46,660

Interest earnings, $225

Dividend income, $80

One personal exemption, $3,400

Itemized deductions, $7,820

Adjustments to income, $1,150

What amount would Thomas report as taxable income?

2.   If Lola Harper had the following itemized deductions, should she use Schedule A or the standard deduction? The standard deduction for her tax situation is $5,450.

Donations to church and other charities, $1,980

Medical and dental expenses that exceed 7.5 percent of adjusted gross income, $430

State income tax, $690

Job-related expenses that exceed 2 percent of adjusted gross income, $1,610

3.   What would be the average tax rate for a person who paid taxes of $4,864.14 on a taxable income of $39,870?

4.   Based on the following data, would Ann and Carl Wilton receive a refund or owe additional taxes?

Adjusted gross income, $46,186

Itemized deductions, $11,420

Child care tax credit, $80

Federal income tax withheld, $4,784

Amount for personal exemptions, $6,800

Average tax rate on taxable income, 15%

5.      Would you prefer a fully taxable investment earning 10.7 percent or a tax-exempt investment earning 8.1 percent?  Why? (Assume a 28 percent tax rate.)

6.      On December 30, you decide to make a $1,000 charitable donation. If you are in a 28 percent tax bracket, how much would you save in taxes for the current year? If that tax savings was deposited in a savings account for the next five years at 6 percent, what would be the future value of that account?