Question

Use the table below to answer questions 1 to 3.

2019 Federal Tax Rate Schedule: Single Taxpayer
If taxable income is over:	But not over:	The tax is:
$0	$9,700	10% of taxable income
$9,700	$39,475	$970 plus 12% of the amount over $9,700
$39,475	$84,200	$4,543 plus 22% of the amount over $39,475
$84,200	$160,725	$14,382.50 plus 24% of the amount over $84,200
$160,725	$204,100	$32,748.50 plus 32% of the amount over $160,725
$204,100	$510,300	$46,628.50 plus 35% of the amount over $204,100
$510,300	No limit	$153,798.50 plus 37% of the amount over $510,300

Catherine, a single taxpayer, has taxable income of $44,000. Catherine’s taxable income includes a $14,000 long-term capital gain.

(a) What is Catherine’s tax on ordinary income?  

(b) What is Catherine's tax on long-term capital gain?

(c) What is Catherine's total tax liability for 2019?

Answer 1

a) Tax on Ordinary Income of $ 30,000 (44000-14000).
Tax as per Slab she will come under bracket of 12% plus $ $ 970.
So Tax on ordinary Income is (970 + (30000-9700)*12%) = $ 3,406
b) Tax Rate on Long term capital gain is 15% if Total taxable Income between
$ 39,376 to $ 4,34,550.
So Tax on LTCG is $ 2,100 (14000*15%)
c) Total Tax Liability is Tax on Ordinary income and Long term Capital Gain (LTCG)
Total Tax Liability (3406+2100)
5,506	$