Question

Using 2017 tax law, answer this question about the following scenario. Numbers in parentheses indicate age. Each taxpayer has only the income stated. Unless otherwise stated, each prospective dependent is an unmarried U.S. citizen who does not provide more than half of their own support. In no case will more than one taxpayer attempt to claim the same qualifying child as a dependent. No one other than the persons listed lived in the home. --------- "Jim (49) and Linda (50) are married and will file a joint return. They have two children, Todd (20) and Traci (15), who both lived with their parents all year. Todd has a part-time job, and Traci is still in high school. Jim and Linda provide more than 50% of the support for both children. Jim’s wages were $26,500; Linda’s wages were $16,805; Todd’s gross income was $3,100; Traci’s was $0. Jim, Linda, Todd, and Traci had health care coverage all year through Jim's employer. Jim and Linda are not claiming any education or retirement savings contribution credits." --- What is the sum of Jim and Linda's standard deduction and their exemptions? --- What is the amount of Jim and Linda's taxable income? --- Tax - income credit, deduction and exemptions

Answer 1

The standard deduction for year 2017 for married couples filing jointly is $ 12,700

Hence,The sum of Jim's and Linda's standard deduction for the year 2017 is $12,700

The personal exemption amount for year 2017 is $4050. In case In case of married people personal exemption is allowed for the spouse as well.

Therefore Jim and LInda are eligible for an exemption of $ 8,100 (4050 x 2)

Jim's and Linda's wages = 43,305 (26,500 +16805)

Less;Standard Deduction =12,700

Gross taxable Income = 30,605 (43,305-12,700)

Exemption amount    = 8,100

Taxable Income    = 22,505 (30,605-8,100)

Tax = 18,650 x 10% + 3,855 x 15% = 1,865 + 578.25 = $ 2,443.25

Less : Child Tax Credit    = $ 2,000 ( 1000 per child x 2)

Net Tax payable    = $ 443.25

Please note Todd and Traci have both lived with their parents all through the year and the income earned by each of them is less than $ 4,050 and also since their parents Jim and Linda provided more than 50% of the support for both children they are qualified children for the purpose of claiming the Child Tax Credit which is $ 1000 per child.

Healt coverage provided by Jim's employer is exempted from income tax.