Federal Tax 1 Spring 2018 In Class Homework Problems Chapter 1 USE THE 2017 TAX

Question

Federal Tax 1 Spring 2018 In Class Homework Problems Chapter 1 USE THE 2017 TAX RATE SCHEDULES FOR THIS HOMEWORK PROBLEM 1. George & Martha are married and file a joint income tax return. In 2017 the couple had $ 250,000 of total income and S 200,000 in taxable income. aCalculate George & Martha's Washington's 2017 federal income tax liability (USE THE 2017 tax rate schedule in appendix D in your book) What is George & Martha's marginal federal tax rate for 2017? What is the George & Martha's average tax rate for 2017? d. What is the George & Martha's effective tax rate for 2017? George & Martha are expecting an additional $ 20,000 in income. Which of the above rates is relevant to them concerning the additional income? Why?

Explanation / Answer

Question 2 a)

Federal tax savings 2017 :

Forcasted income 2017 is $ 37000.

Its is assumed the person is aged around 28 and is eligible for personal exemption and also assumed that he is self employed.

With this assumption calculation is as below :

Gross total income $ 37000

Adjusted gross income $ 34386

Deduction for exemption $ 4050

Itemised deduction $ 6350

( higher of two options ) $ 6350

Taxable income $ 23986

Tax before credits $ 3132

Self employnment tax $ 5228

Total tax $ 8360

Without charitable deduction

The donation saves him $ 996

Question 2b)

His aunt give him best advice to make donation before december 2017 for which the reason is as follows,

Donating now can also ensure that you have enough tax deductions for 2017. Note that donations made before December 31, 2017 count toward the 2017 tax year, even if the charge isn’t made until 2018. Getting a tax deduction because you’ve made charitable donation means that your taxable income will be reduced in 2017. The rules around how much to deduct change depending on income level, donation amount, and other variables. Check in with the IRS or your accountant about how much you’ll be able to claim for the donation.

Gross income $37,000 Qualified plan contributions - $0 Adjusted gross income = $37,000 Standard/Itemized deductions - $6,350 Taxable income = $30,650 Tax liability before credits $4,131 Self employment tax - $5228 Estimated tax liability = $9359

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