ACC 330 Module 2 Filing Status and Dependents Assignment Example

Four People and One Return: Filing Status, Dependents and the Standard Deduction for a Composite Ohio Household, Tax Year 2024

[Student Name]

Southern New Hampshire University

ACC 330: Federal Taxation I

Module Two Assignment

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Four People and One Return: Filing Status, Dependents and the Standard Deduction for a Composite Ohio Household, Tax Year 2024

Introduction

A composite household in suburban Columbus, Ohio, is preparing its federal return for tax year 2024. Jordan, 44, is a heating and cooling technician on a W-2. Elena, 42, runs a freelance bookkeeping practice from home. Their daughter Maya is 15; their son Leo is 19 and a full-time sophomore at a state university; and Elena's mother, Rosa, 72, has lived with them since her husband died two years ago. Before any income is counted, the return needs three answers: which filing status the couple uses, who qualifies as a dependent and which standard deduction applies. All dollar limits are the 2024 amounts (Internal Revenue Service, 2023).

Filing Status

Marital status is determined on the last day of the year. Jordan and Elena were married on December 31, so they may file jointly or separately; head of household and single are not available to them (Internal Revenue Service, 2024a). Filing separately would rarely help a couple with similar incomes and no special circumstance, and here it would hurt: married couples filing separately cannot claim the American opportunity credit for Leo's tuition, each spouse would have a $14,600 standard deduction rather than a shared $29,200, and Elena's self-employment income would be taxed on her return alone. A quick comparison in Project Two confirms that joint filing produces lower total tax. The couple files jointly.

There are situations in which separate returns make sense, and it is worth saying why none applies. A spouse with large medical expenses and low income can sometimes clear the 7.5 percent of AGI floor only on a separate return; a spouse worried about the other's tax reporting may want to avoid joint liability; and borrowers on income-driven student loan plans sometimes file separately to lower their payments. Jordan and Elena have no large medical costs, trust each other's records and have no federal student loans, so the joint return is both cheaper and simpler.

Leo: Qualifying Child

Table 1. Qualifying Child Tests for Leo, 19

Leo earned $6,200 at a summer job and will file his own return to recover the tax withheld, claiming no personal exemption and checking the box that someone else can claim him, but filing a return does not affect his status, and the gross income test does not apply to a qualifying child. Because Leo is 17 or older, he does not qualify for the child tax credit; he qualifies the couple for the $500 credit for other dependents and, as a student, for the education credit claimed on their return.

Maya: Qualifying Child

Maya, 15, lives at home all year, is their daughter and has no income. She meets every qualifying child test and, being under 17 with a valid Social Security number, qualifies the couple for the $2,000 child tax credit.

Rosa: Qualifying Relative

Rosa is not anyone's qualifying child, since she is older than the taxpayers and not a student. She can still be a dependent as a qualifying relative if she meets four tests (Internal Revenue Service, 2024b).

Relationship or household. A parent satisfies the relationship test even without living in the home, and Rosa also lived with the family all year.

Gross income. The 2024 limit is $5,050. Rosa received $14,800 of Social Security and $900 of bank interest. Only income that is taxable counts. Her Social Security is not taxable, because half of her benefits plus her other income, $8,300, is well below the $25,000 base amount for a single taxpayer, so her gross income for the test is just the $900 of interest.

Table 2. Support Test for Rosa

Support. The couple provided $10,000 of Rosa's $19,000 total support, more than half. The $5,800 of Social Security Rosa saved in a bank account is not support, because it was not spent on her. Counting it would have pushed her own share above half and cost the family the credit, which is why the support worksheet must track how money was used, not merely how much was received. Not a qualifying child. She is not. Rosa is therefore a qualifying relative, and the couple may claim the $500 credit for other dependents for her.

Standard Deduction and Credits

The standard deduction for married filing jointly in 2024 is $29,200. Neither Jordan nor Elena is 65 or blind, so no additional amount applies; Rosa's age does not affect their deduction. Whether the couple should itemize instead is examined in Module Six; their deductible expenses come to about $17,700, far below the standard amount, so the answer is unlikely to change. The dependency determinations unlock $3,000 of credits before any education credit: $2,000 for Maya and $500 each for Leo and Rosa.

Table 3. Summary

Conclusion

Jordan and Elena file jointly for tax year 2024 and take a $29,200 standard deduction. Maya and Leo are qualifying children, and Rosa is a qualifying relative because her taxable income is under $5,050 and the couple pays more than half her support. Together the three dependents bring $3,000 of credits, and Leo's enrollment opens the way to an education credit computed in Project Two.

References

Internal Revenue Service. (2023). Revenue procedure 2023-34. U.S. Department of the Treasury.

Internal Revenue Service. (2024a). Dependents, standard deduction, and filing information (Publication 501). U.S. Department of the Treasury.

Internal Revenue Service. (2024b). Your federal income tax: For individuals (Publication 17). U.S. Department of the Treasury.