Question

Walt is single and has no dependents. Without considering his $17,000 adjusted net capital gain (ANCG), his taxable income, which includes no investment income, in 2017 is as follows: AGI $246,000 Home mortgage interest $21,700 State and local income taxes 7,800 Charitable contributions 6,500 Personal exemption 4,050 40,050 Taxable income $205,950 What is Walt's tax liability without the ANCG is? What is Walt's tax liability with the ANCG?

2017 tax rate schedule

Single
	If taxable income is:		The tax is:
		Not over $9,325. . . . . . . . . . . . . . . . . . . . . . .	10% of taxable income.
		Over $9,325 but not over $37,950. . . . . . .	$932.50 + 15% of the excess over $9,325.
		Over $37,950 but not over $91,900. . . . . . .	$5,226.25 + 25% of the excess over $37,950.
		Over $91,900 but not over $191,650. . . . . .	$18,713.75 + 28% of the excess over $91,900.
		Over $191,650 but not over $416,700. . . . .	$46,643.75 + 33% of the excess over $191,650.
		Over $416,700 but not over $418,400. . . . .	$120,910.25 + 35% of the excess over $416,700.
		Over $418,400. . . . . . . . . . . . . . . . . . . . . . . .	$121,505.25 + 39.6% of the excess over $418,400.

Standard deductions

STANDARD DEDUCTION
Filing Status
Married individuals filing joint returns and surviving spouses		$12,700
Heads of households		9,350
Unmarried individuals (other than surviving spouses and heads of households)		6,350
Married individuals filing separate returns		6,350
Additional standard deduction for the aged and the blind
	Individual who is married and surviving spouses	1,250	*
	Individual who is unmarried and not a surviving spouse	1,550	*
Taxpayer claimed as dependent on another taxpayer’s return: Greater of (1) earned income plus $350 or (2) 1,050.
* These amounts are $2,500 and $3,100, respectively, for a taxpayer who is both aged and blind.

PERSONAL AND DEPENDENCY EXEMPTION AND PHASE-OUTS
Personal and dependency exemption		4,050
Phase-outs for high income taxpayers:
Personal and dependency exemptions are reduced by 2% for each $2,500 increment (or part of increment)
for AGI above the threshold amount.
Itemized deductions are reduced by 3% for each dollar of AGI above the threshold amounts (taxpayers cannot
lose more than 80% of their allowable itemized deductions).
For both provisions, the AGI threshold amounts are:
	Married individuals filing joint returns and surviving spouses	$313,800
	Heads of households	287,650
	Unmarried individuals (other than surviving spouses and heads of households)	261,500
	Married individuals filing separate returns	156,900

PrintDone

Answer 1

Walt's tax liability without the ANCG is:

Since his total taxable income is $205,950, it falls under the tax bracket of Over $191,650 but not over $416,700. . . . .

Therefore Walt's Tax Liability without ANCG is computed as = $46,643.75 + 33% of the excess over $191,650.

= $46,643.75 + 33% *(205950 - 191650) = $46,643.75 + 0.33 * $14,300. = $46,643.75+ $4,719 = $51,362.75 (Answer)

Walt's tax liability with the ANCG is:

=$46,643.75 + 33% *(205950 - 191650) +(15% of 17000) + (3.8% of 17000) = 51362.75 + 2550+646 = $54,558.75