Multi-Source Income Tax Reconciliation

W-2 Wages: Report on Form 1040, Line 1a (federal wages/salaries)
Qualified Dividend Income: Report on Schedule B; preferential rate applies (typically 15% for MFJ filers in moderate-to-high brackets)
Long-Term Capital Gains: Report on Schedule D; preferential 15% rate (0%, 15%, or 20% depending on income level)
Short-Term Capital Gains: Taxed as ordinary income; included in taxable income line
Schedule C (Self-Employment): Gross income minus deductions; subject to self-employment tax (~92.35% × 15.3%)
Schedule E (Rental Income): Rental income minus allowable deductions (depreciation, mortgage interest, repairs, property tax)
Taxable Interest: Report on Schedule B; includes savings accounts, CDs, taxable bonds
Municipal Bond Interest: Exempt from federal tax; included in AGI for purposes of determining thresholds (Medicare NIIT, etc.)

Qualified Charitable Distribution (QCD): Direct distribution from IRA to charity (ages 70½+); reduces AGI without itemizing
Self-Employment Tax Deduction: 50% of SE tax paid; reduces AGI

Category	Example	Limit/Notes
Mortgage Interest	$28,500	Limited to $750k of acquisition debt (aggregate)
Property Tax (SALT)	$42,000	CAPPED at $10,000 (aggregate SALT)
Charitable Contributions	$16,000	Up to 50% of AGI for cash; 30% for appreciated securities
Medical Expenses	$18,500	Only amount >7.5% of AGI is deductible

Child Tax Credit: $2,000 per qualifying dependent under age 17 (or age 18-23 if full-time student); partially refundable
Education Credits: American Opportunity ($2,500 max) or Lifetime Learning ($2,000 max); check income phase-out
Earned Income Tax Credit (EITC): Not available to high-income taxpayers (Patricia & James exceed AGI limits)

Calculate AGI: Gross income minus above-the-line deductions (QCD, SE tax deduction, etc.)
Determine Itemized or Standard Deduction: Use the greater of itemized deductions or standard deduction (2024: MFJ = $29,200)
Compute Taxable Income: AGI minus itemized/standard deduction
Apply Tax Brackets: Ordinary income taxed at progressive rates (10%, 12%, 22%, 24%, 32%, 35%, 37%)
Apply Preferential Rates to Capital Gains: Long-term capital gains taxed at 0%, 15%, or 20% (layers with ordinary income)
Subtract Tax Credits: Child Tax Credit, Education Credits reduce tax liability dollar-for-dollar
Determine Refund or Tax Due: Tax liability minus withholdings and estimated payments

100% Rule: If current-year tax < $1,000, no estimated payment required
90% Rule: Estimated payments of 90% of current-year tax liability avoid penalties
110% Rule: If prior-year AGI exceeded $150,000, pay 110% of prior-year tax liability to avoid penalties (100% if AGI ≤ $150,000)
Quarterly Payments: Due April 15, June 15, Sept 15, and Jan 15 of the following year

Results