Question

2013 Individual Tax Rates
Single Individuals
If a Corporation's Taxable Income Is	It Pays This Amount on the Base of the Bracket	Plus This Percentage on the Excess over the Base (Marginal Rate)	Average Tax Rate at Top of Bracket
Up to $8,925	$0	10.0%	10.0%
$8,925 - $36,250	892.50	15.0	13.8
$36,250 - $87,850	4,991.25	25.0	20.4
$87,850 - $183,250	17,891.25	28.0	24.3
$183,250 - $398,350	44,603.25	33.0	29.0
$398,350 - $400,000	115,586.25	35.0	29.0
Over $400,000	116,163.75	39.6	39.6

Standard deduction for individual: $6,100

Married Couples Filing Joint Returns
If a Corporation's Taxable Income Is	It Pays This Amount on the Base of the Bracket	Plus This Percentage on the Excess over the Base (Marginal Rate)	Average Tax Rate at Top of Bracket
Up to $17,850	$0	10.0%	10.0%
$17,850 - $72,500	1,785.00	15.0	13.8
$72,500 - $146,400	9,982.50	25.0	19.4
$146,400 - $223,050	28,457.50	28.0	22.4
$223,050 - $398,350	49,919.50	33.0	27.1
$398,350 - $450,000	107,768.50	35.0	28.0
Over $450,000	125,846.00	39.6	39.6

Standard deduction for married couples filing jointly: $12,200

Quantitative Problem: Jenna is a single taxpayer with no dependents so she qualifies for one personal exemption. During 2013, she earned wages of $134,000. She doesn't itemize deductions, so she will take the standard deduction and her personal exemption to calculate 2013 taxable income. In addition, during the year she sold common stock that she had owned for five years for a net profit of $4,100. How much does Jenna owe to the IRS for taxes? Round your intermediated and final answers to the nearest cent.
$

Answer 1

Answer

PARTICULARS	AMOUNT
Income	$134,000
Personal exemption for one	($4,050)
Standard deduction	($6,100)
Taxable income	$ 123,850

So, tax payable on taxable income of $123,850 is:

$123,850*24.30% = $30095.55

1.Jenna is a single taxpayer with no dependents qualifying for one personal exemption and standard deduction.

2.U.S tax code allows its tax filers to exclude a standard amount for each individual from the taxable amount. In this case as there are no dependents, only one personal exemption. For example say if there are three additional dependents to jenna, then a total of 4 personal exemptions would be allowed during filing taxes.

3.The personal exemption amount for financial year 2017 is $4050 per person.

4.Deductions are nothing but reduction in taxable income. As Jenna doesn't itemize deductions, she will take standard deductions.

5.The standard deduction in 2017 is $6100 for single filers.

Secondly, We have a long term capital gain of $4,100 which is earned by selling a common stock held for five years.

According to IRS, Long term capital gains tax percentage for a single filer in the 28% tax bracket category is 15%.

So, Capital gains tax = 15% of capital gains.

capital gains = $ 4,100

Tax on capital gain = 0.15 * $ 4,100 = $615

So,

Total Tax Payable = $ 30,095.55 + $ 615

Total Tax payable by Jenna = $ 30710.55