Question

Questions In 2018, Mason, age 35 and single, earned wages of $75,000. Mason had no exclusions, and he had deductions for AGI of $1,000. Mason’s itemized deductions for the year totaled $13,000. Mason has no QBI (and thus no QBI deduction). Mason is entitled to a $2,000 tax credit. 1. What is Mason’s AGI? 2. What is Mason’s taxable income? 3. Using the single tax rates schedules, what is Mason’s federal income tax liability (before credits) for 2018? 4. What is Mason’s federal income tax liability after application of tax credits (i.e. the amount due or amount Mason needs to pay)?

Answer 1

Answer 1:

Earned Wages = $75,000

Less, deduction for AGI = 41,000

AGI = $75,000 - $1,000 = $74,000

Mason's AGI = $74,000

Answer 2:

Itemized deduction = $13,000

Standard deduction allowed for 2018 = $12,000

As Itemized deduction is higher, Mason will take itemized deduction.

There is no personal exemption for 2018.

Hence Mason's taxable income =   $74,000 - $13,000 = $61,000

Answer 3:

FOR 2018, for filing status 'Single', the tax slabs and tax rates are as follows:

Mason's federal income tax liability (before credits) for 2018 = $4,453.50 + 22% * ($61,000 -$38,700) = $9,359.50

Answer 4:

Mason is entitled to a $2,000 tax credit

As such Mason’s federal income tax liability after application of tax credits (amount due) = $9359.50 - $2,000 = $7,359.50