Lauren, a single taxpayer, had the following income and deductions for the 2017 tax year:

INCOME:	Salary	$90,000
	business income	24,000
	interest income from bonds	6,000
	Tax-exempt bond interest	4.400
	TOTAL REVENUE	$ 124,400
DEDUCTIONS:	Business expenses	$11,500
	Deductions per item	10,000
	personal exemption	4,050
	TOTAL DEDUCTIONS	$25,550

PERSONAL AND DEPENDENCY EXEMPTION AND REMOVAL
Personal and dependency exemption		$4,050
High Income Taxpayer Phaseouts:
Personal and dependency exemptions are reduced by 2% for each increase of $2,500 (or part of the increase)
for AGI above the threshold amount.
Itemized deductions are reduced by 3% for each AGI dollar above the threshold amounts (taxpayers cannot
lose more than 80% of your allowable itemized deductions).
For both provisions, the AGI threshold amounts are:
	Married filing jointly and surviving spouses	$ 313,800
	heads of household	287,650
	Single persons (other than surviving spouses and heads of household)	261,500
	Married people filing separate returns	156,900

STANDARD DEDUCTION
Civil status
Married filing jointly and surviving spouses		$12,700
heads of household		9,350
Single persons (other than surviving spouses and heads of household)		6,350
Married people filing separate returns		6,350
Additional standard deduction for elderly and blind
	Individual who is married and surviving spouses	1,250	*
	Individual who is not married and is not a surviving spouse	1,550	*
Taxpayer claimed as a dependent on another taxpayer's return: The greater of (1) earned income plus $350 or (2) $1,050.
* These amounts are $2,500 and $3,100, respectively, for a taxpayer who is both elderly and blind.

Single

If the tax base is: The tax is:

Not more than $9,325. . . . . . . . . . . . . . . . . . . .10% of taxable income.

More than $9,325 but not more than $37,950. . . . . . . . .$932.50 + 15% of the excess over $9,325.

More than $37,950 but not more than $91,900. . . . . . .$5,226.25 + 25% of the excess over $37,950.

More than $91,900 but not more than $191,650. . . . . .$18,713.75 + 28% of the excess over $91,900.

More than $191,650 but not more than $416,700. . . . .$46,643.75 + 33% of the excess over $191,650.

More than $416,700 but not more than $418,400. . . . .$120,910.25 + 35% of the excess over $416,700.

More than $418,400. . . . . . . . . . . . . . . . . . . . .$121,505.25 + 39.6% of the excess over $418,400.

Requirement A. Calculate Lauren's taxable income and federal tax liability for 2017. 

Requirement b. Compute Lauren's effective, average, and marginal tax rates. 

Requirement c. For tax planning purposes, which of the three Part b rates is the most important?

Answer rating: 100% (QA)

Solution To calculate Laurens taxable income we need to subtract her deductions from her total revenue 124400 25550 98850 To calculate her federal tax ... View the full answer