Question

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.​

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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.

Answer 1

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.