Problem 1-8 The Tax Formula for Individuals, Filing Status and Tax Computation,

Question

Problem 1-8
The Tax Formula for Individuals, Filing Status and Tax Computation, Personal and Dependency Exemptions (LO 1.3, 1.5, 1.6, 1.7)

Alicia (age 27) is a single, full-time college student. She earns $13,200 from a part-time job and has taxable interest income of $1,450. Her itemized deductions are $845.

Table for the standard deduction

Calculate Alicia's taxable income for 2017.
$

Filing Status 2017 Standard Deduction Single $ 6,350 Married, filing jointly 12,700 Married, filing separately 6,350 Head of household 9,350 Qualifying widow(er) 12,700

Explanation / Answer

Alicia age ( Single) 27 Earning from a part-time job $13,200 interest income $1,450 itemized deductions $845 Computation of Alicia's taxable income i Earning from part time job $13,200 ii Interest income $1,450 iii=i+ii Gross income $14,650 iv Less : Standard deduction -6350 v=iii-iv Taxable income $8,300 Hence, taxable income = $8300 Note : we can take either Standard deduction or itemized deduction. Since Standard deduction is higher amount we have considered Standard deduction.

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