Dong and Chen are a married couple with two dependent children under the age of 17. Their adjusted gross income is $ 257 comma 500.00​, and they plan to take the standard deduction. Calculate their total tax as well as the child tax credit that they can claim for the 2020 tax year. Assume that their filing status is married filing jointly spouse and that all of their income is taxable and the amount does not include any dividends or capital gains.

Let's go step by step to calculate Dong and Chen's total tax and child tax credit for the 2020 tax year.

### Step 1: **Determine the Standard Deduction**
For 2020, the **standard deduction** for a married couple filing jointly is:

\[
\text{Standard Deduction} = \$24,800
\]

### Step 2: **Calculate Taxable Income**
To find the taxable income, we subtract the standard deduction from their adjusted gross income (AGI).

\[
\text{Taxable Income} = \text{AGI} - \text{Standard Deduction}
\]
\[
\text{Taxable Income} = 257,500 - 24,800 = 232,700
\]

### Step 3: **Apply the 2020 Tax Brackets**
The **2020 tax brackets** for married couples filing jointly are as follows:

- 10% on income up to $19,750
- 12% on income between $19,751 and $80,250
- 22% on income between $80,251 and $171,050
- 24% on income between $171,051 and $326,600
- (Higher rates exist, but their income doesn't reach those levels)

We can now calculate the tax for each portion of their income:

1. **First $19,750 at 10%**:
   \[
   19,750 \times 0.10 = 1,975
   \]
2. **Next $60,500 ($80,250 - $19,750) at 12%**:
   \[
   60,500 \times 0.12 = 7,260
   \]
3. **Next $90,800 ($171,050 - $80,250) at 22%**:
   \[
   90,800 \times 0.22 = 19,976
   \]
4. **Next $61,650 ($232,700 - $171,050) at 24%**:
   \[
   61,650 \times 0.24 = 14,796
   \]

Now, sum these amounts to get the total tax:

\[
\text{Total Tax} = 1,975 + 7,260 + 19,976 + 14,796 = 44,007
\]

### Step 4: **Calculate the Child Tax Credit**
The **Child Tax Credit** in 2020 is $2,000 per child under 17, but it starts to phase out when the adjusted gross income exceeds $400,000 for married couples filing jointly. Since Dong and Chen's AGI is $257,500, they are fully eligible for the child tax credit.

Since they have **two children under 17**, the total child tax credit is:

\[
\text{Child Tax Credit} = 2,000 \times 2 = 4,000
\]

### Step 5: **Calculate Total Tax Liability**
To find the final tax liability, subtract the child tax credit from the total tax calculated earlier:

\[
\text{Final Tax Liability} = 44,007 - 4,000 = 40,007
\]

### Summary of Calculations:
- **Taxable Income**: $232,700
- **Total Tax**: $44,007
- **Child Tax Credit**: $4,000
- **Final Tax Liability**: $40,007

### Do you have any questions or would you like more details on any part of this calculation?

---

Here are 5 related questions you might find helpful:
1. How does the phase-out of the child tax credit work for higher income levels?
2. What are the tax brackets for other filing statuses (e.g., single, head of household)?
3. How would their tax change if they had capital gains or dividends?
4. How does the child tax credit differ from the additional child tax credit?
5. What other tax credits or deductions might they qualify for?

### Tip:
Make sure to keep track of any eligible tax credits and deductions each year, as they can significantly reduce your tax liability.

Dong and Chen are a married couple with two dependent children under the age of 17. Their adjusted gross income is $257,500.00, and they plan to take the standard deduction. Calculate their total tax as well as the child tax credit that they can claim for the 2020 tax year. Assume that their filing status is married filing jointly and that all of their income is taxable, and the amount does not include any dividends or capital gains.

This guide walks through the calculation of total tax and child tax credit for a married couple with an adjusted gross income of $257,500 in the 2020 tax year. It covers tax brackets, deductions, and the child tax credit step-by-step, offering clarity on how to reduce tax liability. Ideal for high school seniors and college-level students learning about personal finance.

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