Question

Henry, age 70 and single, is claimed as a dependent on his daughter's tax return. During 2017, he had interest income of $4,000 and $800 of earned income from consulting. Henry's taxable income is:

a.$1,400.

b.$1,300.

c.$2,100.

d.$0.

e.None of these choices are correct.

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Incorrect. $4,000 gross income – greater of $1,050 or ($800 earned income + $350) – $1,550 (additional standard deduction for age 65 and older) = $1,300.

Why is Henry's gross income only 4000? Why is his consulting work not included?

Answer 1

Henry's gross income will only be $4000 and $800 earned from consulting income is not included as greater of $1050 and earned income+350 is claimed as a deduction.

The deduction is available as Henry is claimed as a dependent on his daughter's tax return.

As per the filing requirement worksheet for dependents line 1 is to enter dependent's earned income+$350. Line 2 is the minimum amount of $1050. Line 3 compares lines 1 and 2 and the larger amount is entered.

Thus the answer will be = 4000-greater of 1050 or (800+350) - 1550

= 4000-1150-1550

= 4000-2700

= 1300