Question

The following information for 2019 relates to Thomas, a single taxpayer, age 18:

Wages $9,500

Taxable Interest income 10,600

Itemized deductions 1,500

a. Compute Thomas’s tax liability for 2019 assuming he is self-supporting.

b. Compute Thomas’s tax liability for 2019 assuming he is a dependent of his parents and they support him entirely (his earned income is NOT more than 50% of his support).

Answer 1

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.