Question

1.Steve’s tentative minimum tax (TMT) for 2019 is $242,000. What is his AMT if his regular tax is $230,000?

2.Henrich is a single taxpayer. In 2019, his taxable income is $451,000.     His $451,000 of taxable income includes $55,000 of long-term capital gain that is taxed at preferential rates.  What is his tax liability (including the net investment income tax)?

3.Brooke works for Company A for half of 2019, earning $60,000 in salary and she works for Company B for the second half of 2019, earning $91,000 in salary. What is Brooke’s FICA tax obligation for the year?

Answer 1

1. AMT = TMT - Regular tax = 242,000 - 230,000 = $12,000

2.

Income tax (ordinary income 396000) = 46628.50+(35%*(396000-204100)) = $113793.50 = $113,794

Net investment tax = 55,000*20% = $11,000 (as taxable income is more than $434550)

Total tax liability = $124794

In 2019

For single taxpayers having taxable income $0 - $39,375, preferential tax rate is 0%, $39,376 -$434,550, preferential tax rate is 15%, above $434,550, it is 20%.

3.

FICA Tax = $10429

Brook’s total salary = 60000+91000 = $151,000

Brooke's salary is above the $132900 Social Security wage base limit for 2019, she pays social security tax of 6.20% on $132900 and Medicare tax of 1.45% on $151,000

FICA Tax = (132900*6.2%)+(151000*1.45%) = $10429.30 = $10429

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