Martin S. Albert (Social Security number 111-11-1111) is 39 years old and is married to Michele R. Albert (Social Security number 123-45-6789). The Alberts live at 512 Ferry Road, Newport News, VA 23601. They file a joint return and have two dependent children (Charlene, age 17, and Jordan, age 18). Charlene's Social Security number is 123-45-6788, and Jordan's Social Security number is 123-45-6787. In 2011, Martin and
Michele had the following transactions:
a. Martin received $115,000 in salary from Red Steel Corporation, where he is a construction engineer. Withholding for Federal income tax was $10,750. The amounts withheld for FICA tax were as follows: $4,486 ($106,800 x 4.2%) for Social Security and $1,668 ($115,000 x 1.45%) for Medicare. Martin worked in Mexico from January 1, 2010, until February 15, 2011. His $115,000 salary for 2011 includes $16,000 he
earned for January and one-half of February 2011 while working in Mexico.
b. Martin and Michele received $800 in qualified dividends on Green, Inc. stock and $400 interest on Montgomery County (Virginia) school bonds.
c. Martin received $2,300 interest from a Bahamian bank account.
d. Michele received 50 shares of Applegate Corporation common stock as a stock dividend. The shares had a fair market value of $2,000 at the time Michele received them, and she did not have the option of receiving cash.
e. Martin and Michele received a $900 refund on their 2010 Virginia income taxes. Their itemized deductions in 2010 totaled $12,500.
f. Martin paid $6,000 alimony to his former wife, Rose T. Morgan (Social Security number 123-45-6786).
g. Martin and Michele kept the receipts for their sales taxes paid of$1,100.
h. Martin and Michele's itemized deductions were as follows:
ill State income tax paid and withheld totaled $5,100.
Real estate taxes on their principal residence were $3,400.
ill Mortgage interest on their principal residence was $2,500.
Cash contributions to the church totaled $2,800.
Part 1-Tax Computation
Compute the Alberts' net tax payable (or refund due) for 2011.
Part 2-Tax Planning
The Alberts are considering buying another house. Their house mortgage payments would increase by $500 (to $1,500) per. month, which includes a $250 increase in interest and a $100 increase in property tax. The Alberts would like to know how much the mortgage payments would increase net of any change in their income tax.