Question

Jeremy earned $102,100 in salary and $8,100 in interest income during the year. Jeremy’s employer withheld $11,200 of federal income taxes from Jeremy’s paychecks during the year. Jeremy has one qualifying dependent child who lives with him. Jeremy qualifies to file as head of household and has $32,700 in itemized deductions. (Use the tax rate schedules.)

A.) Determine Jeremy's tax refund.

B.) Assume that in addition to the original facts, Jeremy has a long-term capital gain of $14,050. What is Jeremy's tax due including the tax on capital gain?

C.) Assume that the original facts except that Jeremy only had $7,000 in itemized deductions. What is Jeremy's tax due?

Answer 1

Ans-a- Calculation of tax:-

No.	Particulars	Amount ($)
1	Gross Income	110,200 ($102,100+8,100)
2	For AGI deductions	-
3	Adjusted gross income	110,200
4	Standard deduction	18,000
5	Itemized deduction	32,700
6	Greater of standard deduction or itemized deduction	32.700
7	Taxable Income (3-6)	77,500
8	Income tax liability	11,598 [($77,500-$51,800)*22%+5,944]
9	Child tax credit	2,000
10	Tax withholding	11,200
11	Tax due/ (Tax refund) (8-9-10)	(1,602)

Calculation of Child tax credit:-

Child tax credit available for 1 qualifying dependent child= $2,000

Modified Adjusted gross income limit for head of household= $200,000

Modified Adjusted Gross Income (same as adjusted gross income in this case)=$110,200

Hence, child tax credit= $2,000

b-

No.	Particulars	Amount ($)
1	Gross Income	124,250 ($102,100+8,100+$14,050)
2	For AGI deductions	-
3	Adjusted gross income	124,250
4	Standard deduction	18,000
5	Itemized deduction	32,700
6	Greater of standard deduction or itemized deduction	32,700
7	Taxable Income (3-6)	91,550
8	Income tax liability ($91,550-$14,050=$77,500) [($77,500-$51,800)*22%+5,944]+($14,050*15%)	13,705.50
9	Child tax credit	2,000
10	Tax withholding	11,200
11	Tax due/ (Tax refund) (8-9-10)	$505.50

c-

No.	Particulars	Amount ($)
1	Gross Income	110,200 ($102,100+8,100)
2	For AGI deductions	-
3	Adjusted gross income	110,200
4	Standard deduction	18,000
5	Itemized deduction	7,000
6	Greater of standard deduction or itemized deduction	18,000
7	Taxable Income (3-6)	92,200
8	Income tax liability	15,026 [($92,200-$82,500)*24%+12,698]
9	Child tax credit	2,000
10	Tax withholding	11,200
11	Tax due/ (Tax refund) (8-9-10)	$1,826

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