Stuart is in the 30 percent tax bracket. Recently, he sold stock that he had held longer than a year for a gain of $ 45,300 .
How much does Stuart pay on his gain? Hint: look at page 105 on the handout for capital gain tax %
Chapter 4. Taxes: Paying All You Own and Not a Penny More -2,500 82,500 -24,400 2. Less Flexible Spending = Adjusted Gross Income (AGI) 3. Minus Standard Deduction 4. Minus Exemptions (6) Equals Taxable income 5. Look up tax in tax table: : (6 * $0) 58,100 10% on first $19,400 12% on remainder Tentative tax 6. Child tax credit 7. Total Tax Due 1,940 4,644 $6,584 -6,500 $84 (3 * $2,000) + $500 family credit Calculations: Itemized Deduction Method 1. Gross Income $85,000 (Earned + Interest - 401k exclusion) less Flexible Spending -2,500 2. Adjusted Gross Income 82,500 3. Deductions Home Mortgage Interest 6,800 Medical Expenses 813 ($9,063-(82,500* 10) State and local taxes 10,000 ($10,000 max) Tithing 9,600 Total Deductions 27,213 4. Minus Income Exemptions 0 (6 ex. *0) Equals Taxable income 55,287 5. Look up Tax in Table 1,940 10% on first $19,050 $55,287-19,400 *.12 4,306 2% on remainder Calculated tentative tax $6,246 6. Child tax credit -6,500 (2,000 * 3 kids under 18) = Total Taxes Due -S254 Since $1,400 per child is refundable, he will get a refund of the $254. Calculations: Calculate their marginal and average tax rate on gross income. Their marginal tax rate, the tax rate they would pay on each new dollar of income is 15% for both the standard and itemized deduction calculation. Their average tax rate, the rate they actually pay in taxes is their taxes divided by their gross income. Standard deduction = $84/85,000 = 0.1% Itemized deduction = $0/$85,000 = 0% As a check, Federal Tax Worksheet (LT39) may be helpful. - 105 - 2019-2020 Edition Chapter 4. Taxes: Paying All You Own and Not a Penny More -2,500 82,500 -24,400 2. Less Flexible Spending = Adjusted Gross Income (AGI) 3. Minus Standard Deduction 4. Minus Exemptions (6) Equals Taxable income 5. Look up tax in tax table: : (6 * $0) 58,100 10% on first $19,400 12% on remainder Tentative tax 6. Child tax credit 7. Total Tax Due 1,940 4,644 $6,584 -6,500 $84 (3 * $2,000) + $500 family credit Calculations: Itemized Deduction Method 1. Gross Income $85,000 (Earned + Interest - 401k exclusion) less Flexible Spending -2,500 2. Adjusted Gross Income 82,500 3. Deductions Home Mortgage Interest 6,800 Medical Expenses 813 ($9,063-(82,500* 10) State and local taxes 10,000 ($10,000 max) Tithing 9,600 Total Deductions 27,213 4. Minus Income Exemptions 0 (6 ex. *0) Equals Taxable income 55,287 5. Look up Tax in Table 1,940 10% on first $19,050 $55,287-19,400 *.12 4,306 2% on remainder Calculated tentative tax $6,246 6. Child tax credit -6,500 (2,000 * 3 kids under 18) = Total Taxes Due -S254 Since $1,400 per child is refundable, he will get a refund of the $254. Calculations: Calculate their marginal and average tax rate on gross income. Their marginal tax rate, the tax rate they would pay on each new dollar of income is 15% for both the standard and itemized deduction calculation. Their average tax rate, the rate they actually pay in taxes is their taxes divided by their gross income. Standard deduction = $84/85,000 = 0.1% Itemized deduction = $0/$85,000 = 0% As a check, Federal Tax Worksheet (LT39) may be helpful. - 105 - 2019-2020 Edition
