Why does he get a preferential income taxed for his summer internship? I understand for unearned dividend income but don't you get an ordinary tax for his regular job?
b. Carson is 23 years old at year-end. He is a full-time student and earned $14.000 from his summer internship and part-time job. He also received $5,000 of qualified dividend income. Tax liability $ 565 Explanation b. Carson's tax liability is $565. Carson is subject to the kiddie tax because he is a full-time student under age 24 and has unearned income greater than $2,200. Description (1) Gross income/AGI (all unearned income) (2) Minimum standard deduction 3, (3) $350 plus earned income, limited to $12,550 (4) Standard deduction for dependent on another tax return (5) Taxable income (6) Gross unearned income minus $2,200 (7) Net unearned income (8) Kiddie tax value Amount Explanation $ 19,000 $14,000 earned income and $5,000 unearned income (qualified dividends) $ 1,100 Minimum for taxpayer claimed as dependent on another return $ 12,550 $350 + $14,000 earned income (not to exceed $12,550 regular standard deduction) $ 12,550 Greater of (2) and (3) $ 6,450 (1) - (4) $ 2,800 $5,000 dividends - $2,200 $ $ 2,800 Lesser of (5) or (6) $ 420 [$2,800 x 15%], Carson's parents' tax rate for net capital gains and qualified dividend is 15%, see tax rates for net capital gains and qualified dividends for married filing jointly, $200,000 of taxable income $ 3,650 (5) - (7) $ 2,200 $5,000 Dividends - (7) $0 (10) x 0% (Carson's tax rate would be 10 percent if it were ordinary income, so he qualifies for 0 percent rate on dividends). $ 1,450 (9) - (10) $ 145 (12) * 10% $ 565 (8) + (11) + (13) B) (9) Taxable income taxed at Carson's rate (10) Preferential income taxed at Carson's tax rates (11) Tax on preferential income (12) Taxable income tax at Carson's ordinary tax rates (13) Tax on ordinary income Total tax 11 b. Carson is 23 years old at year-end. He is a full-time student and earned $14.000 from his summer internship and part-time job. He also received $5,000 of qualified dividend income. Tax liability $ 565 Explanation b. Carson's tax liability is $565. Carson is subject to the kiddie tax because he is a full-time student under age 24 and has unearned income greater than $2,200. Description (1) Gross income/AGI (all unearned income) (2) Minimum standard deduction 3, (3) $350 plus earned income, limited to $12,550 (4) Standard deduction for dependent on another tax return (5) Taxable income (6) Gross unearned income minus $2,200 (7) Net unearned income (8) Kiddie tax value Amount Explanation $ 19,000 $14,000 earned income and $5,000 unearned income (qualified dividends) $ 1,100 Minimum for taxpayer claimed as dependent on another return $ 12,550 $350 + $14,000 earned income (not to exceed $12,550 regular standard deduction) $ 12,550 Greater of (2) and (3) $ 6,450 (1) - (4) $ 2,800 $5,000 dividends - $2,200 $ $ 2,800 Lesser of (5) or (6) $ 420 [$2,800 x 15%], Carson's parents' tax rate for net capital gains and qualified dividend is 15%, see tax rates for net capital gains and qualified dividends for married filing jointly, $200,000 of taxable income $ 3,650 (5) - (7) $ 2,200 $5,000 Dividends - (7) $0 (10) x 0% (Carson's tax rate would be 10 percent if it were ordinary income, so he qualifies for 0 percent rate on dividends). $ 1,450 (9) - (10) $ 145 (12) * 10% $ 565 (8) + (11) + (13) B) (9) Taxable income taxed at Carson's rate (10) Preferential income taxed at Carson's tax rates (11) Tax on preferential income (12) Taxable income tax at Carson's ordinary tax rates (13) Tax on ordinary income Total tax 11
