Question

Jeremy earned $100,000 in salary and $6,000 in interest income during the year. Jeremy's employer withheld $11,000 of federal income taxes from Jeremy's paychecks during the year. Jeremy has one qualifying dependent child who lives with him. Jeremy qualifies to file as head of household and has $23,000 in itemized deductions. (Use the tax rate schedules.) b. Assume that in addition to the original facts, Jeremy has a long-term capital gain of $4,000. What is Jeremy's tax refund or tax due Including the tax on the capital gain? (Round your intermediate calculations and final answer to the nearest whole dollar amount.) Answer is not complete. Description Amount Gross income $ 110,000 For AGI deductions Adjusted gross income $ 110.000 Standard deduction 18,350 ltemized deductions 23,000 Greater of standard deduction or omized deductions 23.000 Taxable income 87.000 Income tax ability Child tax credit 2.000 Tax withholding 11,000 (5) (8) (9) (10) Tax due

Answer 1

You have solved most of the question by yourself. The only incomplete part is income tax liability and tax due. So let us analyse the the computation of income tax liability first.

The total taxable Income in the given scenario is $87,000. Jeremy is qualified to file return as head of household. Therefore, we will consider schedule Z for determining the Income Tax liability.

Taxable Income of Jeremy falls in the slab of ($84,200 - $160,700). Therefore, Jeremy will have to pay tax at a rate of 24% on the income above $84,200 in addition to a tax liability of $12,962 on the taxable income of $84,200.

Income Tax liability = [24% of ($87,000 - $84,200)] + $12,962

= $672 + $12,962

= $13,634

Therefore, Income Tax liability of Jeremy is $13,634.

Now let us analyse the Tax Due. Jeremy has a tax liability of $13,634 and is eligible to receive child tax credit of $2,000. Therefore the tax liability of Jeremy is reduced to $11,634.

Jeremy's employer has withheld taxes of $11,000 which has also reduced his tax liability by $11,000. Therefore, Tax payable by Jeremy is $634 ($11,634 - $11,000).

Hence, Jeremy has $634 Tax Due.