Complete using 2016 Tax Brackets John R. Lane (SSN 111-44-6666) lives at 1010 Ip

Question

Complete using 2016 Tax Brackets

John R. Lane (SSN 111-44-6666) lives at 1010 Ipsen Street, Yorba Linda, California 90102. John, a single taxpayer, age 66, provided 100% of his cousin’s support. The cousin lives in Arizona. He wants to take advantage of the presidential election campaign check-off. John is an accountant. Other relevant information includes

Salary $20,000

Taxable pension 31,000

Interest income(taxable) 300

IRA deduction 5,000

Itemized deductions (from Schedule A) 8,000

Withholding 6,000

Assume that Schedule A, if necessary, has already been completed. Complete Form 1040.

Explanation / Answer

This is 6.69% of your total income of $20,000. 6.69% would also be your average tax rate. Your income puts you in the 15% tax bracket. At higher incomes, exemptions, many deductions and many credits are phased out. This increases your tax bill and your marginal tax rate. With these phase outs, adding $1,000 to your income would result in a 15% marginal tax rate.

This is 6.69% of your total income of $20,000. 6.69% would also be your average tax rate. Your income puts you in the 15% tax bracket. At higher incomes, exemptions, many deductions and many credits are phased out. This increases your tax bill and your marginal tax rate. With these phase outs, adding $1,000 to your income would result in a 15% marginal tax rate.

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