Question

Jamie is single. In 2017, she reported $100,000 of taxable income, including a long-term capital gain of $5,000. What is her gross tax liability, rounded to the nearest whole dollar amount? (use the tax rate schedules)

A. 19582

B. 20982

C. 20332

D. 15000

Answer 1

The Answer would be Option C - 20332

Computation:

Let us have the slab rates applicable to Single person:

Rate	Taxable Income Bracket	Tax Owed
10%	$0 to $9,325	10% of Taxable Income
15%	$9,325 to $37,950	$932.50 plus 15% of the excess over $9,325
25%	$37,950 to $91,900	$5,226.25 plus 25% of the excess over $37,950
28%	$91,900 to $191,650	$18,713.75 plus 28% of the excess over $91,900
33%	$191,650 to $416,700	$46,643.75 plus 33% of the excess over $191,650
35%	$416,700 to $418,400	$120,910.25 plus 35% of the excess over $416,700
39.60%	$418,400+	$121,505.25 plus 39.6% of the excess over $418,400

Let us also have the Capital gains tax rate table:

Marginal Tax Rate (Tax Bracket)	Long-Term Capital Gains Tax Rate
10%	0%
15%	0%
25%	15%
28%	15%
33%	15%
35%	15%
39.60%	20%

Now, let us compute the income tax:

Income (other than Long Term Capital Gains) = $ 100,000 - $ 5,000 = $ 95,000

Income Tax on Income other than Long Term Capital Gains = $ 18,713.75 + ( $ 95,000 - $ 91,900)* 28%

= $ 18,713.75 + $ 868

= $ 19,582 (Rounded Off)

Income Tax on Long Term Capital Gain = $ 5,000 * 15% (Since Marginal Tax rate is 28% slab)

= $ 750

Total Income Tax of Jamie = $ 19,582 + $ 750

= $ 20,332