Question

Henrich is a single taxpayer. In 2019, his taxable income is $455,000. What is his income tax and net investment income tax liability in each of the following alternative scenarios? Use Tax Rate Schedule, Dividends and Capital Gains Tax Rates, Estates and Trusts for reference. (Do not round intermediate calculations. Round your answers to 2 decimal places. Leave no answer blank. Enter zero if applicable.) His $455,000 of taxable income includes $2,000 of long-term capital gain that is taxed at preferential rates.

Income Tax?

Answer 1

Answer:

• Total tax liability is $ 1,34,219.5

Calculation of total tax laibility:

Particulars	Amount	Amount
Taxable income		$ 4,55,000
Preferentially taxed income		$ 2,000
Less: Income taxable at ordinary rates	= $ 4,55,000 - $ 2,000 = $ 4,53,000	$ 4,53,000
Tax on income taxable at ordinary rates	From working notes	$1,33,743.5
Add: Tax on preferentially taxed income	$2,000*20% = $2,000*20/100 = $400	$400
Income tax liability	=$ 1,33,743.5+$400 =$ 1,34,143.5	$1,34,143.5
Add: Net investment income tax liability	$2,000*3.8%[3.8% is used as taxable income exceeds $ 2,00,000] =$2,000*3.8/100 =$76	$ 76
Total tax liability	$ 1,34,143.5 +$76 =$ 1,34,219.5	$1,34,219.5

Therefore,the total tax liability is $ 1,34,219.5

Working notes:

Calculation of Tax on income taxable at ordinary rates:

$ 0 to $ 9,700 ( $9,700 - $ 0)	$ 9,700	10%	$ 9,700 * 10/100	$ 970
$ 9,701 to $ 39,475($39,475-$9,700)	$ 29,775	12%	$ 29,775*12/100	$ 3,573
$ 39476 to $ 84,200($84,200-$ 39,475)	$44,725	22%	$ 44,725*22/100	$9,839.5
$84,201 to $ 1.60.725($1.60.725-$84,200)	$76,525	24%	$ 76,525*24/100	$18,366
$1,60,726 to $2,04,100($2,04,100 - $1,60,726)	$43,375	32%	$43,375*32/100	$13,880
$2,04,101 to $ 5,10,300($4,53,000 - $ 2,04,100)	$2,48,900	35%	$2,48,900*35/100	$ 87,115
Toatal tax on income taxable at ordinary rates				$1,33,743.5