Question

Computation of taxable income. The following information relates to Tom, a single taxpayer, age 18. Tax Year 2019. Wages = $7,000 Taxable interest income = 425 Itemized deductions = 310 a. Compute Tom's taxable income assuming he is self-supporting. b. Compute Tom's taxable income assuming he is a dependent of his parents.

Answer 1

a. Self supporting : Adjusted Gross Income = 7000 + 425 = 7425 ;

Now, for 2019 ; standard deductions = 12200 ; So Max{310,12200} = 12200; so consider standard deductions instead of itemized. Then , Taxable income = 7425 - 12200 = -4775 < 0 ; since this is negative , implies taxable income is ZERO.

b.

Dependent : Adjusted Gross Income = 7000 + 425 = 7425 ;

Now, for 2019 ; standard deductions = AGI + 350 = 7775 ; So Max{7775,1100} = 7775; so consider standard deductions instead of itemized. Then , Taxable income = 7425 - 7775 = -350 < 0 ; since this is negative , implies taxable income is ZERO.