****************************************************Personal, Dependency exempti
ID: 2382857 • Letter: #
Question
****************************************************Personal, Dependency exemption: $3,950
Filing Status Deduction*
Basic Standard Deduction**
Additional Standard
Social Security Base Amounts
Married Joint
$12,400
$1,200
$32,000$44,000
Single
6,200
1,550
$25,000$34,000
Head of Household
9100
1550
$25,000$34,000
*Special rules if claimed on someone else’s tax return
**Blind taxpayer, taxpayer 65 or older
Self employment taxes are assessed at 15.35% of net* self-employment income below $117,000 and at 2.9% on the excess. *net=92.35% of the amount reported. Note that the $117,000 amount is reduced by wages paid. Salary does not reduce the 2.9% tax
Tax rate on qualified dividents
0%--MTR 10% or 15%
15%--MTR between 25% and 35%
20%--MTR=39.6%
1. What is the taxable income of a taxpayer filing single (age 57, with good sight)? He claims one exemption (in total). He has adjust gross income of $298,000 for 2014.
2. Howard, who files as head of household, has taxable income for $497,000 in 2014. $62,500 of this income comes from qualified dividends. What is the tax liability for the year?
Filing Status Deduction*
Basic Standard Deduction**
Additional Standard
Social Security Base Amounts
Married Joint
$12,400
$1,200
$32,000$44,000
Single
6,200
1,550
$25,000$34,000
Head of Household
9100
1550
$25,000$34,000
Explanation / Answer
1)
Gross Income = $298,000
Less: Standard deduction = - $6200
Less: Personal Exemption = - $3950
Taxable Income = $287,850
2. tax liability = $62,500 x 20% = $12,500
Taxable income $497,000 falls under 39.6% bracket.
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