Tax calculation. If it helps, pull up a 1040 tax form online. Show your work to get
Question:
Tax calculation. If it helps, pull up a 1040 tax form online. Show your work to get partial credit for partially correct answers. Please copy the numbered list of questions (not the scenario) into your answer and complete each question there.
Federal Tax Code Assumptions
- Tax Base = All income from whatever source derived
- Standard deduction = $12,000 single / $24,000 married filing jointly
- Taxpayer can claim deductions per IRS Form 1040 and related schedules
- Additionally, filers can claim a child tax credit of $3,000 per dependent child. This tax credit phases out 15 cents for every dollar of AGI above $150K single and $250K married filing jointly.
- Federal tax brackets – assume these tax rates apply to taxable income from all income sources (no special rate for capital gains)
Tax Rate | Single Filer | Married Filing Jointly |
10% | $0 - $10K | $0 - $20K |
12% | $10K+ - $40K | $20K+ - $80K |
22% | $40K+ - $85K | $80K+ - $170K |
24% | $85K+ - $160K | $170K+ - $320K |
32% | $160K+ - $205K | $320K+ - $410K |
35% | $205K+ - $510K | $410K+ - $610K |
37% | $510K+ | $610K+ |
State Tax Code Assumptions
- Tax base = federal AGI
- State income tax rate = 4.85%
- Filers can claim a tax credit equal to the sum of 6% of itemized or standard deduction claimed plus $500 per dependent child. This tax credit phases out 2.5 cents for each dollar of AGI above $30,000 single and $60,000 married filing jointly.
Taxpayer Assumptions
Lucia and Antoine are a married couple filing jointly and have two qualifying dependent children. Together they have $120,000 of wage income, $2,000 of interest income, and $5,000 in realized long-term capital gains. They have a combined $3,000 of qualifying "above-the-line" health savings account contributions, IRA contributions, and student loan interest; $8,000 of qualifying charitable contributions; $10,000 of qualifying mortgage interest.
(1) What is federal adjusted gross income (AGI)?
(2) What is federal taxable income?
(3) What is federal tax before any credits?
(4) What is federal tax after any credits?
(5) What is the federal average tax rate with respect to AGI?
(6) What is the federal statutory marginal tax rate?
(7) What is the federal effective marginal tax rate with respect to AGI?
(8) What is the state tax after any applicable tax credits?
(9) What is the state effective marginal tax rate?
(10) It the taxpayers made a total $2,000 qualifying retirement contribution, how much of this $2,000 would be offset by reduced tax?
Expert Answer:
1 Federal adjusted gross income is 135000 2 Federal taxable income is 133000 3 Federal tax before an... View the full answer
