Question

Taxable Income and Tax Liability Calculations (LO. 6)

Total income	$118,000
Excludable income	2,000
Deductions for adjusted gross income	2,500
Deductions from adjusted gross income	8,000

(Hint: The standard deduction for married filing jointly is $24,400.)

Do not round intermediate computations. Round the final tax liability to the nearest cent. Refer to the tax rate schedule to calculate the following.

Based on the above information, for a couple filing jointly, their adjusted gross income (AGI) is $; taxable income is $; and, their tax liability is $.

Answer 1

Answer -

Step - (1) - Calculation of the Adjusted gross income of couple married filing jointly :-

Adjusted gross income:

= Total income - Excluded income - Deductions for adjusted gross income

= $118000 - $2000 - $2500

= $113500

.

Step - (2) - Calculation of the Taxable income of couple married filing jointly :-

Taxable income:

= Adjusted gross income - Greater of standard deduction or itemized deductions

= $113500 - Greater of $24400 or $8000

= $113500 - $24400

= $89100

.

Step - (3) - Calculation of the Tax liability of couple married filing jointly :-

	Tax Rate	Taxable Income ($)	Calculation	Amount ($)
I.	10%	0 - 19400	$19400 * 10%	1940
II.	12%	19401 - 78950	($78950 - $19400) * 12%	7146
III.	22%	78951 - 168400	($89100 - $78950) * 22%	2233
	Tax liability		I + II + III	11319