Question

Cathy, age 37, who is single, has the following information:

$100,000 salary

$8,000 interest

$3,000 life insurance dividends

$900 state income tax refund; she itemized deductions last year

$14,000 mortgage interest paid

$5,000 real property tax paid

$7,000 state income tax withheld

$13,000 in cash contributions to the Sacred Heart Catholic Church

What is Cathy's tax liability?

Answer 1

Answer:

1.Calculation of Taxable Income of Cathy:

Particulars	Amount($)
Salary Income	$100000
Add:Interest Income	$8000
Less:Mortgage Interest Paid	($14000)
Less:Real Property Tax Paid	($5000)
Less:State Income Tax Withheld	($7000)
Less:Cash Contributions to Church	($13000)
Taxable Income	$69000

Calculation of Tax Liability :

=$9876×10% + $30249($40125-$9876)×12% +($69000-$40125)×22%

=$11029.98

​​​​​Notes:

1. Life insurane dividends are not taxable

2. State income tax returns are only taxable if itemized current year.

3.It is assumed that Cathy has receipt of her cash contributions to the Sacred Heart Catholic Church.