Noah and Olivia Anderson are a married couple in their early 20s living in Dallas. Noah Anderson earned $73,000 in 2018 from his job as a sales assistant. During the year, his employer withheld $4,975 for income tax purposes. In addition, the Andersons received interest of $350 on a joint savings account, $750 interest on tax-exempt municipal bonds, and dividends of $400 on common stocks. At the end of 2018, the Andersons sold two stocks, A and B. Stock A was sold for $700 and had been purchased four months earlier for $800. Stock B was sold for $1,500 and had been purchased three years earlier for $1,100. Their only child, Logan, age 2, received (as his sole source of income) dividends of $200 from Hershey stock. Although Noah is covered by his company’s pension plan, he plans to contribute $5,000 to a traditional deductible IRA for 2018. Here are the amounts of money paid out during the year by the Andersons:



Medical and dental expenses (unreimbursed) $ 200

State and local property taxes 831

Interest paid on home mortgage 4,148

Charitable contributions 1,360

Total $6,539

In addition, Noah incurred some unreimbursed travel costs for an out-of-town business trip:

Airline ticket $250

Taxis 20

Lodging 60

Meals (as adjusted to 50 percent of cost) 36

Total $366



Critical Thinking Questions: Each question must be explained in detail do the worksheet.

1. Using the Andersons’ information, determine the total amount of their itemized deductions. Assume that they’ll use the filing status of married filing jointly, the standard deduction for that status is $24,000. Should they itemize or take the standard deduction? Hint: Make a list and what would be the total itemized deduction?
Prepare a joint tax return for Noah and Olivia Anderson for the year ended December 31, 2018, that gives them the smallest tax liability. Use the appropriate tax rate schedule provided in Exhibit 3.3( Read Chapter 3) to calculate their taxes owed.