Question

Jane, age 17, is a dependent of her parents. During 2019, Jane earned $3,900 pet sitting and $4,200 in interest on a savings account.

Determine:  

a. Taxable income

b. Net unearned income

c. Earned taxable income

d. Tax liability

Answer 1

Description	Amount	Explanation
(1)Gross income/AGI	8100	$3900 is earned income and $4200 is unearned income from qualified dividends
(2) Minimum standard deduction	1100	Minimum for taxpayer claimed as dependent on another return
(3) $350 plus earned income	4250	350 + 3900 earned income (not to exceed $12200 regular standard deduction)
(4)Standard deduction for dependent on another tax return	4250	Greater of (2) and (3)
(5)Taxable income	3850	(1) – (4)
(6) Gross unearned income minus $2,200	2000	4200 − $2,200
(7)Net unearned income	2000	Lesser of (5) or (6)
(8) tax rate	10%
(9)Kiddie tax	200	(7) x (8)
(10) Taxable income tax at ordinary tax rates	1850	(5) − (7)
(11) Ordinary tax rates	10%	5000 – (7)
(12) ) Tax on ordinary income	185	(11) × (12)
Total tax	$385	(9) + (13)