Question

Complete the following problem.

Find the income tax owed for:

Unmarried head of household with two dependent children

Gross income: $50,000

Adjustments: none

Deductions:        $4500 state taxes

$2000 theft loss

                  Tax credit: $2000

2012 Marginal Tax Rates, Standard Deductions, and Exemptions

Tax Rate	Single	Married Filing Separately	Married Filing Jointly	Head of Household
10%	up to $8,700	up to $8,700	up to $17,400	up to $12,400
15%	$8,701 to $35,350	$8,701 to $35,350	$17,401 to $70,700	$12,401 to $47,350
25%	$35,351 to $85,650	$35,351 to $71,350	$70,701 to $142,700	$47,351 to $122,300
28%	$85,651 to $178,650	$71,351 to $108,725	$142,701 to $217,450	$122,301 to $198,050
33%	$178,651 to $388,350	$108,726 to $194,175	$217,451 to $388,350	$198,051 to $388,350
35%	more than $388,350	more than $194,175	more than $388,350	more than $388,350
Standard Deduction	$5,950	$5,950	$11,900	$8,700
Exemptions (per person)	$3800	$3800	$3800	$3800

Answer 1

Net Taxable income after all deductions = 50000 - (4500 + 2000 + 2000 + 8700 (std deduction) + 3800 (Exemptions (per person) )) = $ 29,000

Furthermore

Now, the taxes are higher (start at a lower income limit) for Singles compared to Head of Household, so the person would be filing as a Head of Household for lower tax implications.

So, given net taxable income of 29,000, the person would be paying a tax of 10% upto taxable income of $12,400, and 15% for taxable income from $12,401 to $29,000 (refer to last column above for Head of Households tax slabs)

=> Income tax owed = 10% of 12400 + 15% of (29000 - 12400) = 1240 + 2490 = $ 3,730