Question

1- Cheryl is claimed as a dependent on her parents' tax return. She had a part-time job during 2017 and earned $4,900 during the year, which was her only income. What is her standard deduction?

2- These problems deal with Kiddie Tax, Standard Deduction, Taxable Earned Income and Unearned Income. Tax Year 2017

Child Under 19 or Full Time Student <24

25% Percent Bracket For Parents

A.   Child Kevin

Interest Income $1,200

Parents Income $90,000

B.   Child Stacy

Interest Income $4,700

Parents Income (Joint) $90,000

C.   Child Derek

W-2 WAGES $1,500

Interest Income $3,000

Parents Make $90,000

D.   Child Sally

     W-2 WAGES $6,000

     Interest Income $3,600

     Parents Make $ 90,000

Answer 1

1.

The point to be noted here is: standard deduction is generally limited to 1,050 or individual's earned income+350. However, it should not be more than the regular standard deduction 6,350.

According to the question, the standard deduction for Cheryl’s would be: higher of 1,050 or 5250 (4,900+ 350).

Therefore, the answer is 5,250.

2.  

A.   

This can be stated under unearned income. Here, interest income is 1,200 which is more than threshold of 1,050. Therefore, so he has to file separate income tax return. There is no earned income of Kevin

B.   

This can be stated under unearned income. Here, interest income is 4,700 which is more than threshold of 1,050. Therefore, so he has to file separate income tax return. There is no earned income of Stacy.

C.   

Here,

Earned Income (Wages) - 1,500 (less than threshold limit)

Unearned Income (Interest) – 3,000 (More than threshold limit)

Derek has to file Separate Return & pay tax @ 25%

D.   

Earned Income (Wages) – 6,000 (More than threshold limit)

Unearned Income (Interest) – 3,600 (More than threshold limit)

Sally has to file Separate Return & pay tax @ 25%