Carson is 23 years old at year-end. He is a full-time student and earned $10,850

Question

Carson is 23 years old at year-end. He is a full-time student and earned $10,850 from his summer internship and part-time job. He also received $5,300 of qualified dividend income.In 2015, Carson is claimed as a dependent on his parent's tax return. His parents' ordinary income marginal tax rate is 28 percent. Carson's parents provided most of his support. Use Tax Rate Schedule for reference.

What is Carson's tax liability for the year in each of the following alternative circumstances?

Carson is 23 years old at year-end. He is a full-time student and earned $10,850 from his summer internship and part-time job. He also received $5,300 of qualified dividend income.

Carson is 23 years old at year-end. He is a full-time student and earned $10,850 from his summer internship and part-time job. He also received $5,300 of qualified dividend income.In 2015, Carson is claimed as a dependent on his parent's tax return. His parents' ordinary income marginal tax rate is 28 percent. Carson's parents provided most of his support. Use Tax Rate Schedule for reference.

Explanation / Answer

Tax Liabilities of Carsons $ Summer internship & Part time Job        10,850 Qualified Dividend           5,300 Total Taxable income        16,150 If taxable in the hands of Parents           4,522 (@ 28% of $ 16150) If taxable in the hands of Carson Annual Income 2016 $ 16,150.00 Minus Standard Deduction ($ 6,300.00) $ 9,850.00 Minus Personal Exemption ($ 4,000.00) $ 5,850.00 Taxable Income 2016 $ 5,850.00 Income Tax Breakdown [ 2016 Tax Tables ] Tax Rate Threshold Tax Due in Band 10% $ 0.00 to $ 9,275.00 $ 585.00 Income Tax Total from all Rates $ 585.00 Total Income Tax Due $ 585.00 Federal Insurance Contributions Act tax (FICA) 2016 Social Security Rate 6.20% Social Security Compensation Limit $ 118,500.00 Social Security Maximum Tax $ 7,347.00 Social Security Tax Due $ 1,001.30 Medicare Rate 1.45% Medicare Due $ 234.18 Take Home Pay for 2016 $ 14,329.53 What? Amount Minus Total Gross Annual Salary $ 16,150.00 Total Federal Income Tax Due $ 585.00 Total Washington Income Tax Due $ 0.00 Social Security Tax Due $ 1,001.30 Medicare Due $ 234.18 Take Home Pay $ 14,329.53

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