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Michelle_Michy
20200708204652application_assignment___investments__1_.docx
AC309 Unit 5: Application Assignment – Investments
Millie is a single taxpayer and her 2018 taxable income is $181,205, calculated as follows:
|
Description |
Amount |
|
Employee wages |
133,000 |
|
Profit from business (Schedule C) |
15,000 |
|
Ordinary income from partnership (Schedule E) |
22,000 |
|
Interest income |
4,000 |
|
Ordinary dividends (total dividends = 9,000) |
2,000 |
|
Qualified dividends (total dividends = 9,000) |
7,000 |
|
Short-term capital gain |
8,200 |
|
Long-term capital gain |
6,900 |
|
Total Income – Form 1040, Line 6 |
198,100 |
|
Deduction for ½ of self-employment tax |
(495) |
|
Adjusted Gross Income – Form 1040, Line 7 |
197,605 |
|
Standard deduction – Form 1040, Line 8 |
(12,000) |
|
Qualified business income deduction – Form 1040, Line 9 |
(4,400) |
|
Taxable Income – Form 1040, Line 10 |
181,205 |
|
Ordinary Income Bracket |
Tax Calculation |
|
$0 - $9,525 |
10% of ordinary income |
|
$9,526 - $38,700 |
$952.50 plus 12% of ordinary income over $9,525 |
|
$38,701 - $82,500 |
$4,453.50 plus 22% of ordinary income over $38,700 |
|
$82,501 - $157,500 |
$14,089.50 plus 24% of ordinary income over $82,500 |
|
$157,501 - $200,000 |
$32,089.50 plus 32% of ordinary income over $157,500 |
|
$200,001 - $500,000 |
$45,689.50 plus 35% of ordinary income over $200,000 |
|
$500,001 or more |
$150,689.50 plus 37% of ordinary income over $500,000 |
Instructions
(1) Separate Millie’s 2018 taxable income of $181,205 into its ordinary income and preferential income components. Hint – your ordinary income and preferential income amounts should total Millie’s taxable income of $181,205.
|
Taxable Income |
Ordinary Income |
Preferential Income |
|
181,205 |
|
|
(2) Using the single taxpayer ordinary tax rate brackets on the previous page, compute Millie’s 2018 income tax liability she should report on her 2018 Form 1040, Line 11. Do NOT calculate any self-employment tax, additional Medicare tax or net investment income tax that Millie might also be liable for (these additional taxes would be reported on Schedule 4 and Form 1040, Line 14).
|
Description |
Amount |
|
Tax liability – ordinary income |
|
|
Tax liability – preferential income |
|
|
2018 income tax liability (Form 1040, Line 11) |
|
1
