Exam 14: The Individual Tax Formula

Meraleigh, age 16, is claimed as a dependent on her parents' tax return. This year, Meraleigh earned $510 from babysitting and $220 interest income from a savings account. Compute Meraleigh's standard deduction.

Eileen, a single individual, had $125,000 taxable income. Compute her income tax assuming that:Taxable income includes no capital gains.Taxable income includes $14,000 capital gain eligible for the 15% preferential rate.

Julie, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Julie had the following tax information: Standard Deduction Table. Salary \9 5,000 Interest and dividend income 12,800 Capital gain from sale of investments 11,000 Above-the-line deductions 6,900 Itemized deductions 6,900 Compute Julie's adjusted gross income (AGI) and taxable income.

Mr. and Mrs. Kline file a joint return on which they claim the standard deduction. If the taxable income on their return is $35,000, they are not paying a marriage penalty.

The goal of the QBI deduction is to lower the effective tax rate on business profit earned by pass through entities.

Mr. and Mrs. Bennett file a joint tax return. Determine if each of the following unmarried individuals is either a qualifying child or a qualifying relative. Son Alex, age 22, lives in his parents' home and works fulltime as a tax accountant. Alex is self-supporting except for the fact that he does not pay rent to his parents.Daughter Samantha, age 20, is a full-time college student. Samantha lives in a dormitory during the school year, but her parents' home is her permanent residence and they provide 100% of her financial support.Mr. Bennett's brother Max is 42 years old and mentally handicapped. Max lives in a privately operated group home, and Mr. and Mrs. Bennett provide 100% of his financial support. Max has no gross income.Mrs. Bennett's mother, Vera, age 67, lives in a retirement community. Mr. and Mrs. Bennett provide about 75% of her financial support. Vera earned $5,000 this year as a part-time receptionist.

The earned income credit is available only to low-income taxpayers with dependent children.

Which of the following taxpayers can't use the tax rates for married filing jointly in 2020?

Mr. and Mrs. Upton's marginal tax rate on their joint return is 32%. This year, their itemized deductions totaled $25,200, and their standard deduction (MFJ) was $24,800. Compute their incremental tax savings from their itemized deductions.

An individual's taxable income equals adjusted gross income less the QBI deduction.

The unextended due date for the individual tax return (Form 1040) is the 15 ^th day of the third month following the close of the taxable year.

Mr. and Mrs. Daniels, ages 45, and 42, had the following income items in 2020: Salaries and wages \1 22,500 Interest income 6,300 Dividends eligible for 15 \% rate 4,000 Capital gain eligible for 158 rate 1,900 Mr. and Mrs. Daniels have no dependents and claim the standard deduction. Compute their income tax liability on a joint return.