John E. Owens and Sally A. Owens, each age 42, married on September 7, 2011. John and Sally will file a joint return for 2011.
John was divorced from Joyce in March 2010. Under the divorce agreement, John is to pay Joyce $ 1,000 per month for next 10 years or until Joyce's death, whichever occurs first. John pays Joyce $ 12,000 in 2011. In addition, in January 2011, John pays Joyce $ 50,000, which is designated as being for her share of the marital property. Also, John is responsible for all prior years' income taxes.
John's total wage compensation for 2011 is $ 190,000. His employer withheld $ 12,000 for Federal income taxes and $ 3,400 for state income taxes. The following amounts were withheld for FICA taxes: $ 4,485.60 ($ 106,800 X 4.2%) for Social Security and $ 2,755 ($ 190,000 X 1.45%) for Medicare.
Sally recently graduated from law school and is employed by Legal Aid Society, Inc., as a public defender. She received a salary of $ 40,000 in 2011. Her employer withheld $ 5,700 for Federal income taxes and $ 2,300 for state income taxes. The following amounts were withheld for FICA taxes: $ 1,680.00 ( $ 40,000 X 4.2%) for Social Security and $ 850 ($ 40,000 X 1.45%) for Medicare.
Sally has $ 1,500 in dividend on Yellow Corporation stock she inherited. Sally receives an $ 850 refund of 2010 state income taxes. She used the standard deduction on her 2010 Federal income tax return. Alfred receives $ 1,300 refund on his 2010 state income taxes. He itemized deduction on his 2010 Federal income tax return. John and Sally pay $ 4,800 interest and $ 1,450 property taxes on their personal residence in 2011. Their charitable contributions total $ 2,600 (all to their church).
Compute John and Sally's taxable income for 2011.