Question

Jeremy earned $100,800 in salary and $6,800 in interest income during the year. Jeremy’s employer withheld $11,200 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 $26,200 in itemized deductions. (Use the tax rate schedules.)

rev: 07_06_2018_QC_CS-130826

b. Assume that in addition to the original facts, Jeremy has a long-term capital gain of $7,550. What is Jeremy’s tax refund or tax due including the tax on the capital gain?

Answer 1

Computation of Tax liability of Jeremy (Head of household)
For the Year 2019
Particuars		$
Salary		100,800.00
Add: Taxable Interest		6,800.00
Add: Long-term Capital Gain		7,550.00
Total income		115,150.00
Adjustments to income: IRA deduction		-
Adjusted gross income		115,150.00
Less: Whichever is higher
Standard deduction (2019) or	18,350.00
Itemized deductions	26,200.00	26,200.00
Taxable income		88,950.00
Tax on above(use 2019 Tax Rate Schedules to calulate tax liability) (Note 1)		13,478.50
Tax withholding		11,200.00
Tax Due		2,278.50

Note 1:
Step 1:Long-term Capital Gain Tax
i	Long-term capital gain	$7,550
ii	Tax Rate	15%
	(if taxable income between $52,751 to $461,700, Then tax rate is 15% to head of household)
iii	Tax on long-term capital gain (I *ii)	$1,132.50
Step2: Taxable income other than Long-term capital gain
i	Taxable income	$88,950
ii	Lon-term capital gain	$7,550
iii	Taxable income other than long-term capital gain	$81,400
iv	Tax upto $52850	$6,065
v	Tax from $52851 to $81400	$6,281
	(ie ($81400-52850)*22%)
vi	Tax (i)+(ii)	$12,346
Step3: Total tax on taxable income
i	Step 1 + Step 2	$13,478.50