Rose is a single mother (whose child lives with her all year round and is her...

Rose is a single mother (whose child lives with her all year round and is her dependent). She files her tax return as Head of Household. Her 2020 income from wages is $475,650. She has “net long-term capital gains” of $85,000. Total 2020 gross income is $560,650. Rose is under 65 years of age and does not itemize her deductions. What is Rose's total federal income tax? Show work.

A) $112,829

B) $123,344.

C) $138,644

D) $149,701

Solutions

Expert Solution

Option D ) $149,701

Long term capital gain has different tax bracket. Tax on long term capital gain is calculated after calculating the tax on normal income. Use this normal income amount to determine the rate for long-term gain, up to the top of the bracket.

Rate of tax on long term capital gain

Tax rate	Head of household(amount $)
0%	0 - 53,600
15%	53,600 - 469,050
20%	Over - 469,050

(Total taxable income = 457,000+85,000(12,050+72,950) = 542,000)

Standard deduction is deductible in normal income not in long term capital gain.

ekkarill92 answered 1 year ago

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