Question

In 2018, Rachelle, a single taxpayer, has adjusted gross income of $45,000. Her AGI includes $5,000 of interest income. Rachelle has no dependents and does not itemize deductions. What is her 2018 federal income tax? A) $3,404 B) $3,769.50 C) $4,211.50 D) $4,404

Answer 1

Ans is B) $ 3,769.50

According to IRS website

Most interest income are taxable. So $5,000 income is also taxable here.

Standard deduction for single tax payer for 2018 is $12,000

The single tax payer can either claim itemized deductions or standard deduction. Since the question is clear that the tax payer does not itemize deduction. Here standard deduction is claimed.

For individual tax payers the tax rates are:

0 to $9,525 10% of taxable income

$9,526 to $38,700 12% of taxable income

And so on.

Now calculating the federal income tax of Rachelle for 2018

TOTAL INCOME = $ 45,000

LESS TOTAL DEDUCTION : $ 12,000 (i.e. standard deduction)

TAXABLE INCOME =33,000

Now,

Upto $9,525 tax rate is 10% So tax = $9,525 × 10% =$952.5

From $ 9526 to $38,700 tax rate is 12% So ( $33,000 - $9,525) × 12% =$2,817

Therefore total tax = $952.5+ $2,817 = $3,769.50