Question

Jeremy earned $101,400 in salary and $7,400 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 $29,200 in itemized deductions. (Use the tax rate schedulesi) Problem 4-29 Part-b (Algo) b. Assume that in addition to the original facts, Jeremy has a long-term capital gain of $10,550. 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.) Description Amount (1) Gross income $ 0 (2) For AGI deductions (3) Adjusted gross income (4) Standard deduction (5) Itemized deductions (6) (7) Taxable income $ 0 (8) Income tax liability (9) Child tax credit (10) Tax withholding

Answer 1

Solution

Following are the tax statement of Jeremy and see the working note.

Particulors
Gross Income	$      119,350.00
For AGI Deductions	$                           -
Adjusted Gross Income	$      119,350.00
Standard Deduction	$                           -
Itemised Deduction	$         29,200.00
Taxable income	$         90,150.00
Income Tax Liability	$         13,442.00
Child Tax Credit	$                           -
Tax withholding	$         11,000.00
Tax Due	$            2,442.00

Working Note 1. Gross Income Salary Add taxable interest Add long term gain $ 101400 $ 7400 $ 10550 Gross Total Income 119350 2. Long Term Capital Gain Tax Long term capital gain $ 10550 Tax rate 15 % Tax on long term gain (10550*15%) $ 1582.50 (If taxable income between $52751 to $461700, then tax rate 15% to head of house hold) 3. Taxable income other than capital gain Taxable income Long term capital gain Taxable income other capital gain $ 90150 $ 10550 $79600 Tax up to $14100 Tax from $14100 to $53700 Tax from $53700 to $79600 Total $1410 $4752 $5698 $11860 Total tax on taxable income = $13442.50 ($ 1582.50 + $11860)