Comprehensive Problem. Larry Johnson, 45 and single, has the following income and deductions in 2022. He is provided health insurance by his employer. Using the tax rate schedules rather than the tax tables, compute Larry’s tax owed or refund due for 2022.
Salary
$50,000
Interest income
3,200
Qualified dividends
800
Medical expenses
12,150
Medical insurance reimbursements
4,650
Property taxes on personal residence
6,300
Interest on home mortgage
7,600
State and local income taxes
5,800
State and local sales taxes
2,000
Investment interest expense
5,000
In addition, Larry’s car (value = $15,000, cost = $20,000) was stolen during the year, and the insurance reimbursement was only $7,000. He also had $2,000 of travel expenses related to his job that were not reimbursed and $3,000 of federal income tax withheld from his salary.
He elects to treat his dividends as net investment income, so they are not subject to the special long-term capital gains tax rates.
