The Benjamin family had wage earnings of $199,000 in 2015. They received interes

Question

The Benjamin family had wage earnings of $199,000 in 2015. They received interest of $4,500 on corporate bonds and $1,500 on bonds issued by the state. Their dividend income was $500, and they had a $1,000 long-term capital gain on the sale of securities. They paid real estate taxes of $1,450 and state income tax of $3,000, and they donated $550 to their church. They paid interest of $8,000 on their home mortgage. They have one dependent child. The exemption rate is $4,000 per person. Capital gains tax rate is 15%. Single Individuals Married Couples Filing Jointly Income ($) Rate (%) Income ($) Rate (%) 0-9,225 10 0-18,450 10 9,225-37,450 15 18,450-74,900 15 37,450-90,750 25 74,900-151,200 25 90,750-189,300 28 151,200-230,450 28 189,300-411,500 33 230,450-411,500 33 411,500-413,200 35 411,500-464,850 35 Over 413,200 39.6 Over 464,850 39.6 What was their tax liability for 2015 assuming they file jointly as a married couple? Use the Personal Tax Schedules given above. Round the answer to the nearest cent.

Explanation / Answer

Salary $199,000.00 Interest on Corporate Bonds (exclude state bond) $4,500.00 Gross Total Income $203,500.00 Less: Deductions Real estate taxes $1,450.00 State Income Tax $3,000.00 Mortgage Interest $8,000.00 Church Donation $550.00 Total Deduction $13,000.00 Personal and Dependent Exemption = $4000 x 3 $12,000.00 Ordinary Taxable income $178,500.00 Tax on ordinary Income 10% x 18,450 $1,845.00 15% x (74,900 -18450) $8,467.50 25% x (151,200 - 74,900) $19,075.00 28% x ($178,500 - $151,200) $7,644.00 Total Tax on ordinary Income $37,031.50 Tax on capital Gain = 15% x $1000 $150.00 Tax on Dividend = 15% x $500 $75.00 Total Tax Liability $37,256.50 People in the 25% to 35% tax bracket will have to hand over 15% of their dividend income and 15% of their long term capital gain to the IRS,

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