Through November, Tex has received gross income of $87,500. For December, Tex is considering whether to accept one more work engagement for the year. Engagement 1 will generate $7,910 of revenue at a cost of $4,250, which is deductible for AGI. In contrast, engagement 2 will generate $7,910 of revenue at a cost of $3,660, which is deductible as an itemized deduction. Tex files as a single taxpayer.
| a. | Calculate Tex's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has no itemized deductions other than those generated by engagement 2. Description Engagement 1 Engagement 2 1) Gross Income before new work engagement 2) Income from engagement 3) Additional for AGI deduction 4) Adjusted gross Income 5) Greater of itemized/standard deduction 6) Personal exemption Taxable Income | b. | Calculate Tex's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has $4,740 of itemized deductions other than those generated by engagement 2. Description Engagement1 Engagement2 1) Gross Income before new work engagement 2) Income from engagement 3) Additional for AGI deduction 4) Adjusted gross Income 5) Greater of itemized/standard deduction 6) Personal exemption Taxable Income: | c. | Calculate Tex's taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has $9,760 of itemized deductions other than those generated by engagement 2. Description Engagement1 Engagement2 1) Gross Income before new work engagement 2) Income from engagement 3) Additional for AGI deduction 4) Adjusted gross Income 5) Greater of itemized/standard deduction 6) Personal exemption Taxable Income: | | |
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2014 Federal Tax Rate Schedule Schedule X-Single Schedule Z-Head of Household If taxable income is over If taxable income is over: But not But not over. The tax is: over: The tax is: 0 $ 9,075 $ 36,900 $ 89,350 $ 186,350 $405,100 $406,750 10% of taxable income $907.50 plus 15% of the excess over $9,075 $5,081.25 plus 25% of the excess over $36,900 $ 18,193.75 plus 28% of the excess over $89,350 $45,353.75 plus 33% of the excess over $186,350 $117,541.25 plus 35% of the excess over $405,100 $118,118.75 plus 39.6% of the excess over $406,750 $ 12,950 $ 12,950 $ 49,400 $ 49,400 $127,550 $127,550 $206,600 $206,600 $405,100 $405,100 $432,200 0 $ 9,075 $ 36,900 $ 89,350 $186,350 $405,100 $406,750 10% of taxable income $1,295.00 plus 15% of the excess over $12,950 $6,762.50 plus 25% of the excess over $49,400 $26,300.00 plus 28% of the excess over $127,550 $48,434.00 plus 33% of the excess over $206,600 $113,939.00 plus 35% of the excess over $405,100 $123,424.00 plus 39.6% of the excess over $432,200 $432,200_ Schedule Y-1-Married Filing Jointly or Qualifying Widow(er) Schedule Y-2-Married Filing Separately If taxable income is over. But not over. If taxable income is over: But not The tax is: over: The tax is: 0 $ 18,150 $ 73,800 $148,850 $226,850 $405,100 $457,600 $ 18,150 $ 73,800 $148,850 $226,850 $405,100 $457,600 10% of taxable income $1,815.00 plus 15% of the excess over $18,150 $10,162.50 plus 25% of the excess over $73,800 $28,925.00 plus 28% of the excess over $148,850 $50,765.00 plus 33% of the excess over $226,850 $ 109,58750 plus 35% of the excess over $405,100 $127,962.50 plus 39.6% of the excess over $457,600 0 $, 9,075 $, 36,900 $ 74,425 $113,425 $202,550 $228,800 9,075 $, 36,900 $ 74,425 $113,425 $202,550 $228,800 $ 10% of taxable income $907.50 plus 15% of the excess over $9,075 $5,081.25 plus 25% of the excess over $36,900 $14,462.50 plus 28% of the excess over $74,425 $25,382.50 plus 33% of the excess over $113,425 $54,793.75 plus 35% of the excess over $202,550 $63,981.25 plus 39.6% of the excess over $228,800
