Lauren, a single taxpayer, had the following income and deductions for the tax year 2017:
Requirement a. Compute Lauren’s taxable income and federal tax liability for 2017.(Calculate the tax using the tax rate schedule. Do not round interim tax calculations. Round the amount entered into the cell to the nearest wholedollar.)
Requirement b. Compute Lauren’s marginal, average, and effective tax rates. (Round your answers to two decimal places, X.XX%.)
Requirement c. For tax planning purposes, which of the three rates in Part b is the most important?
|Interest income from bonds||6,000|
|Tax-exempt bond interest||4,400|
|PERSONAL AND DEPENDENCY EXEMPTION AND PHASE-OUTS|
|Personal and dependency exemption||$4,050|
|Phase-outs for high income taxpayers:|
|Personal and dependency exemptions are reduced by 2% for each $2,500 increment (or part of increment)|
|for AGI above the threshold amount.|
|Itemized deductions are reduced by 3% for each dollar of AGI above the threshold amounts (taxpayers cannot|
|lose more than 80% of their allowable itemized deductions).|
|For both provisions, the AGI threshold amounts are:|
|Married individuals filing joint returns and surviving spouses||$313,800|
|Heads of households||287,650|
|Unmarried individuals (other than surviving spouses and heads of households)||261,500|
|Married individuals filing separate returns||156,900|
|Married individuals filing joint returns and surviving spouses||$12,700|
|Heads of households||9,350|
|Unmarried individuals (other than surviving spouses and heads of households)||6,350|
|Married individuals filing separate returns||6,350|
|Additional standard deduction for the aged and the blind|
|Individual who is married and surviving spouses||1,250||*|
|Individual who is unmarried and not a surviving spouse||1,550||*|
|Taxpayer claimed as dependent on another taxpayer’s return: Greater of (1) earned income plus $350 or (2) $1,050.|
|* These amounts are $2,500 and $3,100, respectively, for a taxpayer who is both aged and blind.|
If taxable income is: The tax is:
Not over $9,325. . . . . . . . . . . . . . . . . . . .10% of taxable income.
Over $9,325 but not over $37,950. . . . . . . . .$932.50 + 15% of the excess over $9,325.
Over $37,950 but not over $91,900. . . . . . .$5,226.25 + 25% of the excess over $37,950.
Over $91,900 but not over $191,650. . . . . .$18,713.75 + 28% of the excess over $91,900.
Over $191,650 but not over $416,700. . . . .$46,643.75 + 33% of the excess over $191,650.
Over $416,700 but not over $418,400. . . . .$120,910.25 + 35% of the excess over $416,700.
Over $418,400. . . . . . . . . . . . . . . . . . . . .$121,505.25 + 39.6% of the excess over $418,400.