Question

In 2018, Sheryl is claimed as a dependent on her parent’s tax return. Sheryl did not provide more than half her own support. She received $6,500 of interest income from corporate bonds she received several years ago.    This was her only source of income. She is 16 years old at year-end. What is Sheryl’s tax liability for the year?

Answer 1

Gross income/AGI (all unearned income)	$6,500.00
Less: Standard deduction [Greater if $1050 or $0 (earned income) + $350]	-$1,050.00
Taxable Income	$5,450.00
Income taxed at Sheryl’s tax rate
Gross unearned income $6500 minus 2100 =	$4,400.00
Net unearned income : lesser of $5450 & $4400	$4,400.00
Parent’s marginal tax rate	x 35%
Kiddie tax	$1,540.00
Taxable income taxed at Sheryl’s tax rate ($5450 - $4400)	$1,050.00
Sheryl’s income tax rate	x 10%
Child's Tax	$105.00
Total Tax = Kiddie Tax + Child's Tax = $1540 + 105	$1,645.00