Question

Alan and Sara Winthrop are a married couple who file a joint income tax return. They have two children, so they claim a total of 4 exemptions ($4,050 for each exemption). In addition, they have legitimate itemized deductions totaling $25,750. Their total income from wages is $213,500. Assume the following tax table is applicable: Married couples Filing Joint Returns Average Tax Rate at Top of Bracket 10.0% 13.8 You Pay This Plus This Percentage on If Your Taxable Amount on the Base the Excess over the Income Is of the Bracket Base Up to $18,650 $0.00 10.0% $18,650-$75,900 1,865.00 15.0 $75,900-$153,100 10,452.50 25.0 $153,100-$233,350 29,752.50 28.0 $233,350-$416,700 52,222.50 33.0 $416,700-$470,700 112,728.00 35.0 Over $470,700 131,628.00 39.6 What is their federal tax liability? 19.4 22.4 27.1 28.0 39.6 a. $31,077.50 b. $33,522.25 C. $36,664.00 O d. $34,918.50 e. $38,760.50

Answer 1

Option D is correct Income of Alan and Sara Particulars A Total income from wages Amount $ Amount $ 2,13,500 Tax compuatation Slab Amount Calculation Up to $ 18,650 Nil $ 18,650 - $ 75900 10,452.50 base amount at this slab 18,65 i.e 10% on 18,650 + (75,900-18,650) *15% $ 75900 - $ 153100 19,300.00i.e (1,53,100-75,900)*25% $ 153100 - $ 233350 5,166.00i.e (1,71550-153100) *28% Tax Liability 34,918.50 B Exemptions 4*4050 16,200 C legitimate itemized Deductions 25,750 D Net Total income (A-B-C) 1,71,550 Note 1.Exemptions and deductions do not form part of income 2.The tax is calculated on slab basis, by higher the income hogher the tax rates