Question

Please answer the following question and explain how you are getting the answers, thank you!

The following information for 2019 related to Will, a single taxpayer, age 18:

Wages $9,500

Taxable Interest Income $10,600

Itemized Deductions $1,500

a) Compute Wills tax liability for 2019 assuming he is self-supporting

b) Compute Wills tax liability assuming he is a dependent of his parents and they support him entirely (his earned income is NOT more then 50% of his support)

Answer 1

ANSWER:

a.

Wages = $9,500

Taxable Interest income = 10,600

AGI = $9,500 + $10,600 = $20,100

AGI should be deducted by standard deduction or itemized deduction whichever is greater.

Itemized deductions = $1,500
Standard deduction = $12,200

Taxable Income = AGI - Standard deduction

= $20,100 - $12,200

= $7,900

Tax liability = 10% of $7,900 = $790

Thomas’s tax liability for 2019 assuming he is self-supporting is $790.

b.

Wages = $9,500

Taxable Interest income = 10,600

AGI = $9,500 + $10,600 = $20,100

For 2019, the standard deduction for a dependent child is total earned income plus $350, upto a maximum of $12,200.

Maximum standard deduction = $12,200

Taxable Income = AGI - Standard deduction

= $20,100 - $12,200

= $7,900

Tax liability = 10% of $7,900 = $790

Thomas’s tax liability for 2019 assuming he is a dependent of his parents and they support him entirely is $790.