Final answer:
Carson's tax liability depends on the United States' progressive tax system, with a different outcome in each scenario. In Scenario A, his tax liability is $200 based on his earned income. In Scenario B, he also has a potential tax liability on earned income of $200, while his qualified dividends might not be taxed.
Step-by-step explanation:
To determine Carson's tax liability for the year, we consider his income, age, and student status in relation to the United States' progressive tax system. The marginal tax rate that applies to him depends on these factors, regardless of his parents' tax rate.
Scenario A:
- Carson is 17 and has earned $12,000 from employment. Assuming this is in 2013 and the standard deduction and exemption for someone his age (a dependent) is $6,100 for the standard deduction and $3,900 for the exemption, this would mean his taxable income is $12,000 - ($6,100 + $3,900) = $2,000. With the marginal tax rate for the lowest bracket being 10%, Carson's tax liability would be 10% of $2,000, which is $200.
Scenario B:
- Carson is 23, a full-time student, and has earned $12,000 plus $5,000 qualified dividends. The $5,000 in dividends may be taxed at a lower rate, typically 0% if he remains in the lowest tax bracket. However, the earned income of $12,000 would still be subject to the same calculation as in scenario A for standard deduction and exemption, resulting in a possible tax liability for the earned income of $200 as well. The dividends may be tax-free at the federal level if they keep him in the lowest tax bracket (<$36,250 for 2013 for single filers), which in this case, they do.