Question

1. Stewart Myers recently graduated from college and started working as a management consultant. Stewart has a $50,000 student loan balance and he paid $1,200 interest in 2014. Stewart Owns several savings accounts and received a total interest income of $500 in 2014. He contributed 2 percent of his $79,500 salary to his IRA account in 2014. As he completes his tax return for 2014, use the information above and below to help him answer the following questions.

•Stewart’s itemized deduction for 2014: $3,570

•Standard deduction for 2014: $6,200

•Personal exemption for 2014: $3,950

Tax brackets for 2014:

Taxable income range                                     Tax rate

Up to $9,075                                                    10 percent

More than $9,075 but under $36,900               15 percent

More than $36,900 but under $89,350             25 percent

a) What is Stewart’s gross income for 2014?

b) What is Stewart’s adjusted gross income for 2014?

c) What is Stewart’s taxable income for 2014?

d) What is Stewart’s total tax liability for 2014?

e) What is Stewart’s marginal tax rate for his current level of taxable income?

f) Stewart’s average tax rate for 2014 is closest to which of the following?

How would you calculate this using a BA II plus calculator?

Answer 1

From Itemized deduction and standard deduction, only one can be claimed. Claim will be of the deduction whichever is higher of two.