Exam 14: The Individual Tax Formula

An above-the-line deduction reduces both adjusted gross income and taxable income.

Kent, an unmarried individual, invited his widowed father, Martin, to move into his home in January of this year. Martin's only income item was a $14,000 taxable pension from his former employer. Kent provides about 75% of his father's financial support. What is Kent's filing status for the year? 

The Section 199A deduction always has the impact of lowering AGI. 

The majority of individual taxpayers take the standard deduction rather than itemizing.

Mr and Mrs Luang reported $1,417,900 ordinary taxable income for regular tax purposes and had $139,100 positive AMT adjustments and preferences. Compute their tentative minimum tax.

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

Marie, an unmarried taxpayer, is 26 years old. This year, Marie earned $50,000 gross income. Her itemized deductions totaled $5,100. Marie maintained a home for her 12-year-old sister who qualifies as Marie's dependent. Compute Marie's taxable income.

Miss Blixen's regular income tax is $77,390, and her tentative minimum tax is $74,100. Consequently, Miss Blixen's alternative minimum tax (AMT) is zero.

Mr and Mrs Liddy, ages 39 and 41, file a joint return and have no dependents for the year. Here is their relevant information. Standard Deduction Table. Salaries $ 47,000 Taxable interest income 5,000 Above-the-line deductions 1,800 Itemized deductions 16,250

Harry and Sally were married on December 23, 2017. Their income for the entire year is reported on a joint return.

Every individual taxpayer is entitled to an AMT exemption, the amount of which varies with filing status.

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

Determine Mr Smith's 2018 filing status in each of the following independent cases. a. Mr Smith and Mrs Smith were legally divorced on December 1. Mr Smith has not remarried and has no dependent children. b. Mr Smith and the first Mrs Smith were legally divorced on February 10. Mr Smith remarried the second Mrs Smith on December 5. He has no dependent children. c. Mrs Smith dies on June 22. Mr Smith has not remarried and has no dependent children. d. Mrs Smith died on November 1, 2016. Mr Smith has not remarried and maintains a home for one dependent child. e. Mrs Smith died on April 3, 2017. Mr Smith has not remarried and has no dependent children. f. Mr and Mrs Smith were legally divorced on September 10, 2015. Mr Smith has not remarried and maintains a home for his two dependent children.

Which of the following statements describing individual tax deductions is false?

Because a Section 199A deduction affects AGI, it may impact the ability to claim a deduction for unreimbursed medical expenses. 

The standard deduction for single individuals equals one-half of the standard deduction for married individuals filing jointly.

The tax rates for individuals who qualify as a head-of-household are lower than the tax rates for single individuals.

Which of the following taxpayers can't use the tax rates for married filing jointly in 2018?

Adjusted gross income equals total income less itemized deductions.

Mr and Mrs Arlette spent $5,900 for child care for their 12-year-old daughter. Mr Arlette's earned income was $178,000, Mrs Arlette's earned income was $33,100, and the AGI on their joint return was $225,200. Calculate their dependent care credit.