Question

(filing status: single and she is her only dependent) tax calculations are as follows assuming a 2018 tax year). 2018 standard deduction amount is $6,500 and the exemption amount for 2018 is $4150. Bella s single and will claim herself as an exemption. She has a house mortgage interest amount of $4,300, property taxes of $3,900, and made $4,950 in charitable contributions during the year. All these are itemized deductions.

            Wages, salaries, and tips                                                           $38,700

            Plus: Interest income                                                                        142

                        Gross income                                                     $38,842

                  

            Less: Adjustments to (gross) income                                                    0

                        Adjusted gross income                                                  $38,842

            Less: Standard deduction _____

            Less: Exemption (claim one only) _____

                        Taxable income $

            Tax liability                                                                             $

            Less: Taxes withheld                                                                4,150.00

                        Tax due                                                                      $ __________

1.          If Bella itemizes her deductions and uses one exemption, will she owe additional taxes for 2018? If she has underpaid by too great an amount, she may also be subject to an underpayment penalty regardless of whether she files her return by April 15 or not. Refer to IRS Publication 505.

2.         Recalculate Bella's income tax for 2018 taxes without itemizing her deductions and using the same tax schedule. Using President Trump's new income tax law adjustment an increase in the standard deduction and no personal exemption. (2018 Standard deduction = $12,000, Personal exemption = $0). The first $9,525 of her income is taxed at a10% tax rate, the amount over $9,525 is taxed at 12%). Is she eligible for a refund? Which income tax calculation will result in a lower federal income tax for Bella?

Answer 1

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