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Morgan (age 45) is single and provides more than 50% of the support of Tammy (a family friend), Jen (a niece, age 18), and Jerold (a nephew, age 18). Both Tammy and Jen live with Morgan, but Jerold (a French citizen) lives in Canada. Morgan earns a salary of $95,000, contributes $5,000 to a traditional IRA, and receives sales proceeds of $15,000 for an RV that cost $60,000 and was used for vacations. She has $8,200 in itemized deductions.
A. Morgan's taxable income is $____.
B. Using the Tax Rate Schedules (click here), tax liability for Morgan is $____for 2019.
C. Compute Morgan's dependent tax credit.

Respuesta :

Tundexi

Answer:

RV is a personal asset, no loss on sale of personal asset is deductible and Morgan is eligible for filling as Head of Household

a. Morgan's Taxable Income

Salary                                                                    $95,000

IRA Deduction                                                      $5,000

AGI                                                                        $90,000

Greater of standard and itemized deduction    $18,350

Taxable Income                                                   $71,650

b. Tax Liability for Morgan

= $6,065 + ($71,650 - $52,850)*22%

= $6,065 + ($18,800)*22%

= $6,065 + $4,136

= $10,201

Tax Liability for Morgan is $10,201 for 2019

c. Only 2 out of 3 dependent quality for Dependent Credit, therefore, Morgan's dependent tax credit = $500 * 2 = $1,000

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