Question

The Tax Formula for Individuals (LO 1.3) Jason and Mary are married taxpayers in 2017. They are both under age 65 and in good health. For 2017 they have a total of $49,400 in wages and $120 in interest income. Jason and Mary's deductions for adjusted gross income amount to $3,815 and their itemized deductions equal $6,080. They claim two exemptions for the year on their joint tax return

Answer 1

Solution:

The Individual - Taxable income for individuals includes wages, salary, rent, interest, and dividends. Form 1040EZ is generally used by taxpayers who satisfy the following conditions.(Related to Question only)

1. The taxpayer must be single or married filing a joint return.
2. The taxpayer must not be age 65 or over.
3. The taxpayer's taxable income must be less than $ 100,000.
4. The taxpayer's income include only wages, salaries, tips, and taxable interest not more than $ 1500.

The Tax Formula For Individuals( Jason and Mary )

Gross Income

Less: Deduction for Adjusted Gross Income

= Adjusted Gross Income

Less: Greater of Itemized Deductions or Standered Deduction

= Taxable Income

X Tax Rate = Tax Liability

Gross Income = Wages + Interest Income     $49400 + $ 120 = $49520

Deduction for Adjusted Gross Income = $ 3815

Itemized Deduction For Assesment Year 2018 is $ 13000 for Married filing jointly.

Computation of Tax Liability for Jason and Mary

Gross Income. $49520

Less : Deduction for Adjusted Gross Income $3815

Adjusted Gross Income $45705

Less: Standered Deduction $13000

Taxable Income    $32705