In 2018, Simon, age 12, has interest income of $8,960 and no earned income. He has...

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In 2018, Simon, age 12, has interest income of $8,960 and no earned income. He has...

In 2018, Simon, age 12, has interest income of $8,960 and no earned income. He has no investment expenses.

Net unearned income is:

Simon's total tax is:

business accounting

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Answer 1

Answer #1

Answer :

The Net Unearned income = $ 8,960 - $ 2,100 = $ 6,860
Simon's Total Tax is $ 1,289

Working Notes :

1. As Simon is only 12 years of age and has only unearned income he is subject to Kiddie tax 2018.

2. The threshold for Kiddie Tax in 2018 is $ 2,100 (1,050+ 1,050).

3. Net Unearned income = Unearned income - Deduction

4. The tax is calculated as follows :

Taxable income = $ 6,860

Upto $ 2,550 at 10% = $2,550 × 10 % = $ 255
From $ 2,551 to $9,150 at 24% = $ (6,860 - 2,550) × 24 % = $ 1.034.4

Total Tax = $ 255 + $ 1,034.4 = $ 1,289.4

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Answer 2

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