Question

You will need to reference the Tax Cuts and Jobs Act of 2017 (Links to an external site.) to solve the questions in this assignment. The questions below also rely on the following assumptions:

• You file your taxes as a single filer.
• Your only taxable source of income is wage income.
• In 2017 you earned $100,000 of gross wage income.
• In 2017 you claimed one personal exemption.
• In 2017 you claimed itemized deductions of $10,000.

A) Calculate the amount of federal income tax you owed on your 2017 income using the brackets and income under the previous tax law. (Hint: Make sure to account for exemption and deductions.)

B) Calculate the amount of federal income tax you would have owed on your 2017 income using the brackets and income under the new tax law. (Hint: make sure to adjust for changes in personal exemption and deductions.)

C) Calculate the effective tax rate under the previous law given your answer to question 1 and also under the new tax law. Analyze at least two factors that caused the effective tax rate to change. Explain your answer.

Answer 1

Computation of Taxable Income for 2017
Gross Income	$100000.00
Less: Itemised Deduction	$6350.00
Less: Personal Exemption for 2017	$4,050.00
Taxable Income	$89600.00
tax 9525*10% =952.5 29175*20% = 3501 43800*22% = 9636 89600-82500 = 7100 *24% =1704
total tax = 15793.5
Hence, a) His Personal Exemption Amount will be $4050
b): His Taxable Income will be $ 85950

For 2017, taxpayers can claim a personal exemption of $4,050 each for themselves, their spouses and any dependents.they can either itemize deductions or take a standard deduction based on their filing status: $6,350 for singles

b)

Computation of Taxable Income new tax law
Gross Income	$100000.00
Less: Itemised Deduction	$12000.00
Less: Personal Exemption for 2017	-
Taxable Income	$88000.00
9525*10% = 952.5 29174*15% = 4376.25 88000-38700= 49300*25%= 12325
totax tax = 17653.75
Hence, a) His Personal Exemption Amount will be nil in 2018
b): His Taxable Income will be $90000

For 2018–2025, the TCJA suspends personal exemptions but doubles the standard deduction amounts to $12,000 for singles

Single Filer
Current Law	Tax Cuts and Jobs Act
10%	$0-$9,525	10%	$0-$9,525
15%	$9,525-$38,700	12%	$9,525-$38,700
25%	$38,700-$93,700	22%	$38,700-$82,500
28%	$93,700-$195,450	24%	$82,500-$157,500