4.a. How much money was a $100 US federal income deduction worth in tax year 201

Question

4.a. How much money was a $100 US federal income deduction worth in tax year 2014 to a single (unmarried) taxpayer whose taxable income without the deduction was $30,000? Be as specific as possible. You may use the Table on pages 249-260 of the linked 2014 Tax Guide. The table shows the tax due from tax payers with different levels of taxable income. b. Answer part a, assuming that the taxpayer’s taxable income without the deduction was $99,000 instead of $30,000. c. What was the marginal tax rate in 2014 for a married couple filing jointly with total taxable income of $99,000?

Explanation / Answer

4.(a).$100 US FEDERAL INCOME DEDUCTION WORTH IN TAX YEAR 2014

TAXABLE INCOME WITHOUT DEDUCTION=$30,000

The standard deduction, as defined under United States tax law, is a dollar amount that non-itemizers may subtract from their income and is based upon filing status. It is available to US citizens and resident aliens (for tax purposes) who are individuals, married persons, and heads of household and increases every year. It is not available to nonresident aliens residing in the United States (with few exceptions, for example, students from India on F1 visa status can use the standard deduction). Additional amounts are available for persons who are blind and/or are at least 65 years of age. The standard deduction is distinct from personal exemptions, which also are available to all taxpayers and dependents. As one may not take both itemized deductions and a standard deduction, taxpayers generally choose the deduction that results in the lesser amount of tax owed.

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