Question

Computation of Kiddie Tax

In 2020, Simon, age 12, has interest income of $900 and dividend income of $4,000. He has no investment expenses. Determine Simon's net unearned income and total tax liability.

Click here to access the 2020 tax rate schedule. If required, round the tax liability the nearest dollar.

Net unearned income is	$.
Simon's total tax is	$.

Answer 1

Ans: Total Unearned Income= Interest Income+ dividend Income

=> 900+4,000

=> $4,900

As per Law Governed by irs which states that If an unearned income is more than $2,200 then kiddie tax is applicable for the same, therefore any amount above this will be taxable

Net Unearned Income= Total Unearned Income- Standard deduction

=> 4,900- 2,200

=> $2,700

2. Simon total Tax is= $284

If taxable income is upto 2,600 then the tax rate applied is 10% which is 260 in the case

and taxable income over $2,600 but not over $9,450 will be 24% of {2,700-2,600}

=> 260+ 24% of $100

=> 260+ 24

=> $284