Final answer:
To compute Richard and Jennifer's income tax for 2017, we need to calculate their adjusted gross income (AGI), taxable income, and apply the appropriate tax rate using the Tax Rate Schedules. Richard and Jennifer's income tax for 2017 is $2,797.50.
Step-by-step explanation:
To compute Richard and Jennifer's income tax for 2017, we need to follow the steps below:
- First, we need to calculate their adjusted gross income (AGI). AGI is obtained by subtracting itemized deductions from their total income. In this case, their total income is the sum of Richard's salary ($43,000) and the interest from the credit union ($2,100), which amounts to $45,100.
- Next, we need to calculate their taxable income. Taxable income is obtained by subtracting exemptions from AGI. In this case, Richard and Jennifer have two exemptions - one for themselves and one for their child. Each exemption reduces their taxable income by $4,050. So, their taxable income is $45,100 - ($4,050 x 2) = $36,000.
- Now, we can use the Tax Rate Schedules to determine the appropriate tax rate for their taxable income. In 2017, for married individuals filing jointly, the tax rates are as follows:
- 10% on the first $18,650
- 15% on the amount over $18,650 up to $75,900
- 25% on the amount over $75,900 up to $153,100
- 28% on the amount over $153,100 up to $233,350
- 33% on the amount over $233,350 up to $416,700
- 35% on the amount over $416,700 up to $470,700
- 39.6% on the amount over $470,700
- Finally, we can calculate their income tax by applying the appropriate tax rate to their taxable income. Richard and Jennifer's taxable income falls into the 15% tax bracket ($18,651 - $75,900), so their income tax is $18,650 x 0.15 = $2,797.50.
Therefore, Richard and Jennifer's income tax for 2017 is $2,797.50.