An unmarried engineer earns $100, o00 for work done during the The engineer clai

Question

An unmarried engineer earns $100, o00 for work done during the The engineer claims one $3,000 exemption and estimated itemized deduction of $20,000. If single people a automatically allowed $2,400 of deductions. Use the tab 201x tax les to compute the Engineer's federal income tax liability under the following mutually exclusive conditions: i) If the engineer chooses to claims the standard deduction ii) If the engineer chooses to itemize deductions Tax Tables (199x) (Approx.) up to $25, 000 of taxable income Tax rate > $25,000 and less than $50,000 Tax rate 26% > $50,000 and less than $120,000 Tax rate = 32% 12%

Explanation / Answer

Standard deduction (in 2017)=$6,350

.i)If the engineer chooses to claim standard deduction:

Income=$100,000

Deduction=$2,400

Exemption=$3,000

Standard deduction=$6300

Taxable Income=(100000-2400-3000-6300)=$88,300

As per tax table provided,

Income tax=12% of 25,000+26% of (50,000-25,000)+32% of (88,300-50,000)

Income tax=0.12*25000+0.26*25000+0.32*38300= $ 21,756

.ii) If the engineer chooses to itemize deduction:

Income=$100,000

Deduction=$2,400

Exemption=$3,000

Itemized deduction=$20,000

Taxable Income=(100000-2400-3000-20000)= $ 74,600

As per tax table provided,

Income tax=12% of 25,000+26% of (50,000-25,000)+32% of (74,600-50,000)

Income tax=0.12*25000+0.26*25000+0.32*24600=   $ 17,372

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