Paige, age 17, is a dependent of her parents. During 2018, Paige earned $3,900 p

Question

Paige, age 17, is a dependent of her parents. During 2018, Paige earned $3,900 pet sitting and $4,100 in interest on a savings account.

Click here to access the 2018 tax rate schedule

What are Paige's taxable income and tax liability for 2018?

a. Paige's total taxable income is $.

b. Paige's tax liability is $.

2018 Tax Rate Schedules Single—Schedule X Head of household—Schedule Z If taxable income is: Over— But not over— The tax is: of the amount over— If taxable income is: Over— But not over— The tax is: of the amount over— $ 0 $ 9,525 ………10% $ 0 $ 0 $ 13,600 ………10% $ 0 9,525 38,700 $ 952.50 1 12% 9,525 13,600 51,800 $ 1,360.00 1 12% 13,600 38,700 82,500 4,453.50 1 22% 38,700 51,800 82,500 5,944.00 1 22% 51,800 82,500 157,500 14,089.50 1 24% 82,500 82,500 157,500 12,698.00 1 24% 82,500 157,500 200,000 32,089.50 1 32% 157,500 157,500 200,000 30,698.00 1 32% 157,500 200,000 500,000 45,689.50 1 35% 200,000 200,000 500,000 44,298.00 1 35% 200,000 500,000 ……… 150,689.50 1 37% 500,000 500,000 ……… 149,298.00 1 37% 500,000 Married filing jointly or Qualifying widow(er)— Schedule Y–1 Married filing separately—Schedule Y–2 If taxable income is: Over— But not over— The tax is: of the amount over— If taxable income is: Over— But not over— The tax is: of the amount over— $ 0 $ 19,050 ………10% $ 0 $ 0 $ 9,525 ………10% $ 0 19,050 77,400 $ 1,905.00 1 12% 19,050 9,525 38,700 $ 952.50 1 12% 9,525 77,400 165,000 8,907.00 1 22% 77,400 38,700 82,500 4,453.50 1 22% 38,700 165,000 315,000 28,179.00 1 24% 165,000 82,500 157,500 14,089.50 1 24% 82,500 315,000 400,000 64,179.00 1 32% 315,000 157,500 200,000 32,089.50 1 32% 157,500 400,000 600,000 91,379.00 1 35% 400,000 200,000 300,000 45,689.50 1 35% 200,000 600,000 ……… 161,379.00 1 37% 600,000 300,000 ……… 80,689.50 1 37% 300,000

Explanation / Answer

1. paige's taxable Income

Taxable Income = Total Income - Standard deduction

For 2018 Standard deduuction for dependent tax payer must not be greater than a) $1050 or b) $350 + Earned income of $3900 i.e., $4250

Taxable Income = $3900 + $4100 - $4250

Taxable Income = $3750

2. Paige's tax Liability

At Paige's Tax Rate = (Taxable Income - Income taxed at parents rate) * 10%

Income taxed at parents rate = Interest Income - Standard deduction - Base amount = $4100 - $1050 - $1050 = $200

At Paige's Tax Rate = (Taxable Income - Income taxed at parents rate) * 10%

Paige's Tax = ($3750 - $2000) * 10% = $175

Income taxed at parents rate = $2000 * 28% = $560

Total Tax Liability = $735

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