Lacy is a single taxpayer. In 2013, her taxable income is $38,000. What is her t

ID: 2704142 • Letter: L

Question

All of her income is salary from her employer.

Her $38,000 of taxable income includes $1,000 of qualified dividends.

Her $38,000 of taxable income includes $5,000 of qualified dividends.

Lacy is a single taxpayer. In 2013, her taxable income is $38,000. What is her tax liability in each of the following alternative situations? Use Tax rate schedule for reference. (Do not round intermediate calculations. Round your answer to 2 decimal places.) All of her income is salary from her employer. Her $38,000 of taxable income includes $1,000 of qualified dividends. Her $38,000 of taxable income includes $5,000 of qualified dividends.

Explanation / Answer

a. Tax = 4991.25+25%*(38,000-36,250) = 5,428.75

b. Regular income is 37,000 and dividend is 1,000

As regular income is more than 36,250, dividend tax rate is 15%.

So regular tax = 4991.25+25%*(37,000-36,250) = 5,178.75

Dividend tax = 15%*1000 = 150

Total tax = 5,178.75 + 150 = 5,328.75

c. Regular income is 33,000 and dividend is 5,000

As regular income is less than 36,250, dividend tax rate is 0% for 3,250 (i.e. 36250-33000) and 15% for the remaining 1750

Regular tax = 892.5 + 15%*(33,000-8,925) = 4,503.75

Dividend tax = 15%*1750 = 262.5

Total tax = 4,503.75 + 262.5 = 4,766.25

Hope this helped. Let me know in case of any queries.

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Lacy is a single taxpayer. In 2013, her taxable income is $38,000. What is her t

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