Question

Danny Liu is 20 years old and claimed as a dependent on his parents’ tax return. Assume the taxable year is 2017. Compute Danny’s taxable income if Danny’s only income item was $2,712 interest earned on a certificate of deposit. Compute Danny’s taxable income if Danny had two income items: $2,712 interest earned on a certificate of deposit and $3,276 wages from a part-time job. How would your answers change if Danny were not claimed as a dependent on his parents’ return?

Answer 1

For 2017, the taxable income of a tax payer who can be claimed as a dependent by another tax payer cannot exceed $1050 or $350+ dependent's earned income

a)In situation a

Gross Income =$2712

(A-T-L)

AGI = $ 2712

Standard Deduction $1050

Exemptions = 0

Taxable income = $1662

b)He had two income items, $2712 and $3276 wages from part time job

Gross Income= $5988

(A-T-L)

AGI = $5988

Standard deduction = $3626 (wages + $350)

Exemptions = 0

Taxable Income = $2362

c)If Danny is not claimed as a dependent, being a single filer, his standard deduction for 2017 will be $6350, which is more than his earned and unearned income in both cases.