Paige, age 17, is claimed as a dependent on her parents\' 2015 return, on which

Question

Paige, age 17, is claimed as a dependent on her parents' 2015 return, on which they report taxable income of $120,000 (no qualified dividends or capital gains). Paige earned $3,900 pet sitting and $4,100 in interest on a savings account. What are Paige's taxable income and tax liability for 2015? If an amount is zero, enter "0".

a. Paige's standard deduction is $ .

b. Paige's personal exemption is $ .

c. Paige's total taxable income is $ ; however, only $  will be taxed at her rate.

d. Compute Paige's "net unearned income" for the purpose of the kiddie tax. $

e. Assuming that her parents are in the 25% tax bracket and Paige is in the 10% tax bracket, compute her tax liability.
$

Explanation / Answer

Answer a. Paige Standard Deduction is $4250 (Greater if $1000 or $3900 (earned income) + $350) Answer b. Pzaige Personal Exemption $0 Answer c. Earned Income           3,900 Interest Income           4,100 Gross Income           8,000 Less: Personal Exemption                  -   Less: Standard Deduction         (4,250) Taxable Icome           3,750 Answer d. Unearned Income           4,100 Minus: $1,000 base amount + $1,000 standard deduction         (2,000) Unearned income taxed at parents’ rate           2,100 Answer e. Taxable Icome           3,750 Less: Unearned income taxed at parents’ rate         (2,100) Income Taxed at Paige rate           1,650 Paige Tax Rate 10% Paige Total tax Tax Unearned income taxed at parents’ rate               525 Taxed at Paige rate               165 Total Tax               690 Paige’s parents are in the 25% bracket, so her unearned income would generate $525 of tax (25% x 2100).

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