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Several years have gone by since Harry and Belinda graduated from college and started their working careers. They both earn good salaries. They believe that they are paying too much in federal income taxes. The Johnsons' total income last year included Harry's salary of $63,000, Belinda's reportable income of$81,000 after subtracting her 401(k) deposits, $300 interest on savings and checking, and$3000 interest income from the trust that is taxed in the same way as interest income from checking and savings accounts. Harry deposits $3,000 per year into a traditional IRA. (a) What is the Johnsons' reportable gross income on their joint tax return? (b) What is their adjusted gross income? (c) What is the total value of their exemptions? (d) How much is the standard deduction for the Johnsons? (e) The Johnsons are buying a home that has monthly mortgage payments of$3,000, or $36,000 a year. Of this amount, about$32,800 goes for interest and real estate property taxes. The couple has an additional $14,000 in itemized deductions. Using these numbers, calculate their taxable income and tax liability. (f) Assuming they had a combined$18,000 in federal income taxes withheld, how much of a refund will the Johnsons receive? (g) What is their marginal tax rate? (h) Based on gross income, what is their average tax rate? (i) List three additional ways that the Johnsons might reduce their tax liability next year.

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