Question

# Rates for a married taxpayer filing separately are 10% of taxable income up to \$8,375 and...

1. Rates for a married taxpayer filing separately are 10% of taxable income up to \$8,375 and 15% thereafter up to \$34,000. Rates for a couple filing a joint return are 10% of taxable income up to \$16,750 and 15% thereafter up to \$68,000. Miller and Laura Collins are figuring their tax both ways for comparison before deciding which way to file. Miller earned \$20,000 and Laura earned \$40,000. The standard deduction for a married couple filing jointly is \$11,400. The standard deduction for each married taxpayer filing separately is \$5,700. Exemption for each taxpayer is \$3,650.​

 a. Compute the amount of tax the Collins will owe if they file a joint return. b. Compute the amount of tax the Collins will owe if they file two separate returns.

a) Amount of tax the Collins will owe if they file a joint return.

 Particulars Workings Amount Total Income \$20000+\$40000 \$60000 Standard Deduction Given (\$11400) Exemption \$3650*2 (\$7300) Total taxable income \$41300

Tax Computaion: \$16750*10%=1675

\$41300-\$16750=\$24550*15%=\$3682.5

Total Tax liability = \$1675+\$3682.5=\$5357.5

b) Tax liability if Collins file seperate return:

 Particulars Miller Laura Total Income \$20000 \$40000 Standard Deduction (\$5700) (\$5700) Exemption (\$3650) (\$3650) Total Taxable Income \$10650 \$30650 Tax Computation \$8375*10%=\$837.5 \$10650-\$8375=\$2275*15%=\$341.25 Total Tax=\$837.5+\$341.25=\$1178.75 \$8375*10%=\$837.5 \$30650-\$8375=\$22275*15%=\$3341.25 Total Tax=\$837.5+\$3341.25=\$4178.75

Total Tax Payable by Collins= \$1178.75+\$4178.75=\$5375.5

CONCLUSION: Tax Payable in both the situations are equal.

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