Question

2018 Individual Tax Rates Single Individuals If Your Taxable Income Is You Pay This Amount on the Base of the Bracket Plus This Percentage on the Excess over the Base (Marginal Rate) Average Tax Rate at Top of Bracket Up to $9,525 $0 10.0 % 10.0 % $9,525 - $38,700 952.50 12.0 11.5 $38,700 - $82,500 4,453.50 22.0 17.1 $82,500 - $157,500 14,089.50 24.0 20.4 $157,500 - $200,000 32,089.50 32.0 22.8 $200,000 - $500,000 45,689.50 35.0 30.1 Over $500,000 150,689.50 37.0 37.0 Standard deduction for individual: $12,000 Married Couples Filing Joint Returns If Your Taxable Income Is You Pay This Amount on the Base of the Bracket Plus This Percentage on the Excess over the Base (Marginal Rate) Average Tax Rate at Top of Bracket Up to $19,050 $0 10.0 % 10.0 % $19,050 - $77,400 1,905.00 12.0 11.5 $77,400 - $165,000 8,907.00 22.0 17.1 $165,000 - $315,000 28,179.00 24.0 20.4 $315,000 - $400,000 64,179.00 32.0 22.8 $400,000 - $600,000 91,379.00 35.0 26.9 Over $600,000 161,379.00 37.0 37.0 Standard deduction for married couples filing jointly: $24,000 Quantitative Problem: Jenna is a single taxpayer. During 2018, she earned wages of $138,000. She doesn't itemize deductions, so she will take the standard deduction to calculate 2018 taxable income. In addition, during the year she sold common stock that she had owned for five years for a net profit of $4,400. How much does Jenna owe to the IRS for taxes

Answer 1

Answer:

The amount of taxes Jenna owes to the IRS is $20,359.50

Explanation:

Note: The organized table is attached as picture

      Computation of Taxable income  

Income                                           $116,000

Add: Long Term Capital Gain       $7,400

Add: Annual Gross Income           $123,400

Less: Standard Deduction             ($12,000)

Taxable Income                              $111,400

            Computation of the Total Tax

Ordinary Income = $111,400

Taxable income =  $111,400 - $ 7,400 =  $104,000

Tax = $14089.50 + ($10,4000 - $82,500)*24% = $19,249.50

Long Term Capital Gain = $7,400

Taxable income = $7,400

Tax = 7,400 * 15% = $1,110

Total Tax = Ordinary Income Tax + Long term Capital gain Tax

Total Tax = $19,249.50 + $1,110

Total Tax = $20,359.50.