Question

Taylor, age 16, is claimed as a dependent by her parents. For 2019, she has the following income: $5,600 wages from a summer job, $1,495 interest from a money market account, and $2,100 interest from City of Boston bonds.

If required, round your answers to the nearest dollar. If an amount is zero, enter "0".

a. Taylor's standard deduction for 2019 is $.

Taylor's taxable income for 2019 is $

b. Compute Taylor's "net unearned income" for the purpose of the kiddie tax.
$

Compute Taylor's tax liability.
$.

Answer 1

a. Taylor's Standard Deduction for 2019 is $5,950

Taylor's taxable income for 2019 is $1,145

b

Taylors's "Net Unearned Income" for the purpose of the kiddie tax is $0

Taylor's tax liability is $115

WORKING

Calculation of Net Unearned Income

Since Taylor is claimed as a dependent by her parents.

According to The Tax Cuts and Jobs Act of 2017, net unearned income over a threshold of $2,200 will be taxed

In the Taylor's case Total Unearned Income is only $1,495 i.e. interest from a money market account

Since unearned income of Taylor is not crossing threshold limit hence Taylor's Net Unearned Income is $0.

Calculation of Taylor's Tax Liability

Tax bracket applicable to Taylor's will be of File Status - Single

Taylor's Tax Liability = Taylor's Taxable Income * Tax Bracket Rate

= $1,145 * 10%

= $114.50

= $115