Question

Taylor, age 18, is a dependent of her parents. For 2018, she records the following income: $4,400 wages from a summer job, $1,885 interest from a money market account, and $2,100 interest from City of Boston bonds. If required, round your answers to the nearest dollar. If an amount is zero, enter "0".

a. Taylor's standard deduction for 2018 is $ .

Taylor's taxable income for 2018 is $ .

b. Compute Taylor's "net unearned income" for the purpose of the kiddie tax. $

Compute Taylor's tax liability. $ .

Answer 1

solution :
given that
Taylor, age 18, is a dependent of her parents. For 2018,
she records the following income:
$4,400 wages from a summer job,
$1,885 interest from a money market account,
and
$2,100 interest from City of Boston bonds.
For 2018, the standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,050 or the sum of $350 and the individual’s earned income.
Thus standards deduction will be 4400+350 = 4750
Net unearned income will be 1885+0-2100 = 0. Since bond interest is exempt it will not considered. Hence net unearned income will be Zero
Taxable Income = 6285-4750 = 1535, thus her tax liability will 950x10% = $ 153.5