Question

Mr. Johnson has Net Income For Tax Purposes of $250,000, all of which is employment income. His employer has withheld and remitted the required EI and CPP amounts. Mr. Johnson was married on December 1, 2019. His wife, an accounting student, had salary of $27,500. Her tuition fees for 2019 were $4,500 and textbook costs were $800. She wishes to transfer any amounts to her husband.

REQUIRED: Determine the maximum amount of 2019 personal tax credits, including transfers from a spouse or dependant, that can be applied against federal Tax Payable by the taxpayer.

Answer 1

Computation of Income of Mr Johnson for 2019 (Married Filing Jointly)
	Note	Amount
Income from Salary		$250,000
Income from Salary (Wife)		$27,500
Total Income		$277,500
Total Deductions	1 & 2	$24,400
Total Exemptions		$0
Taxable Income		$253,100
Regular Taxes	3	$49,093
Alternative Minimum Tax		$0
Net Investment Income Tax		$0
All Tax Credits		$0
Total Tax with Credits		$49,093
Marginal Tax Rate		24%
Tax Pre-payments	4	$58,314
Tax Amount Owe/ (Refund)		($9,221)

Note 1: In 2019, Standard Deduction is $12,200 (i.e. 12200*2 for both)

Note 2 : Tuition Fee Deduction = $0, if your Adjusted Income was above $80,000 as a single filer or $ 160,000 as married filer

Note 3 Tax Calculation		Amount
Tax on $ 19400 @ 10%		$1,940
Tax on $ 19401-78950 @ 12%		$7,146
Tax on $ 78951-168400 @ 22%		$19,679
Tax on $ 168400-321450 @ 24%		$20,328
(253100-168400)*24%
Total Tax		$49,093

Note 4 : Computation of Income of Mr Johnson for 2019 (Single)
	Note	Amount
Income from Salary		$250,000
Total Income		$250,000
Total Deductions		$12,200
Total Exemptions		$0
Taxable Income		$237,800
Regular Taxes	5	$58,424
Alternative Minimum Tax		$0
Net Investment Income Tax		$0
All Tax Credits		($110)
Total Tax with Credits		$58,314
Marginal Tax Rate		35%
Tax Pre-payments		$0
Tax Amount Owe		$58,314

Note 5 Tax Calculation		Amount
Tax on $ 9700 @ 10%		$970
Tax on $ 9701-39475 @ 12%		$3,573
Tax on $ 39476 -84200 @ 22%		$9,840
Tax on $ 84201 -160725 @ 24%		$18,366
Tax on $ 160726-204100 @ 32%		$13,880
Tax on balance Amount @35%		$11,795
(237800-204100)*35%
Total Tax		$58,424