Libby, age 32, can do it all. She works 30 hours a week at her daytime job as a
ID: 2333572 • Letter: L
Question
Libby, age 32, can do it all. She works 30 hours a week at her daytime job as a technical writer for the county. She also freelances as an editor and ghost writer. Her gross pay from her county job is $30,000 per year. Out of this she pays $2,000 for health insurance premiums (insurance purchased through her employer’s cafeteria plan), contributes $3,000 to her health savings account (also through the cafeteria plan), and contributes $1,500 to her employer’s 457(b) plan. The county also pays for a group term life insurance policy for Libby. The value of the policy is 5 times Libby’s base pay. Libby’s freelance work last year generated net income of $20,000. Libby recently copy-edited a local photographer’s website and in exchange the photographer took free pictures of Libby and her family. The pictures and photo shoot session would normally sell for $150. Libby would typically charge $200 for her copyediting services. Jake and his 3 year-old daughter, Jane, live with Libby. Jane is not Libby’s daughter, but she thinks of her as her own. Jake loves to surf and teaches surfing lessons when he is not watching his daughter Jane. Jake makes cash income from his surf lessons but has to pay a sitter for Jane so he can teach them. He made $5,000 (after expenses) last year teaching surf lessons. Using 2018 tax law, what is Libby’s:
Filing status (3 pts)
Number of dependents (2 pts)
Total gross income reported on the tax return (8 pts)
Adjusted gross income (3 pts)
Taxable income (2 pts)
Income tax (3 pts)
Self-employment tax (3 pts)
Explanation / Answer
3 answers
As per Income Tax Act, 1961
a.
filing status- Individual
b.
own child, step child and legal adopted child are dependent.
Number of dependents = 1,
C.
Total income=
Income from salary 30000
income from freelance work 20000
income from photo shoot 150
income from copy editing service 200
Minor child income 0
Gross total Income 50350
d.
Deduction
1. Health insurance =2000
2. Health saving A/c =3000
3. COntribution to Employer =1500
Total Deduction = 6500.
Net Income/Adjusted Income $43850
e. Taxable Income $43850
f.
Income tax on $43850 `= First we should convert $ into Indian currency
Today price 1$=72.1 Rs.(Today Price)
so, 43850*72.1= 3161585
for an Individual: 0-250000 0 250001-500000 5% tax 12500 500001-1000000
20%tax 100000 1000001-3161585 30%tax 648475.5 total 760975.5
add: Education cess @3% 22829.27 Total Tax 783804.77 in Rs. Total tax 10871.
08 in $
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.