Question

John is filing taxes individually, his salary is $102,000, he also received $5,000 on interest from its bank accounts, $750 on dividends from Abbot stocks, he received $10,000 from selling stocks from Tesla that were purchased 8 month ago for $7,500, and he received $16,000 on dividends and finally he sold stocks from Amazon for $17,000 and he bought them 2 years ago for $8,000. Standard deduction $12,000

Calculate
a. Taxable income coming from short term
b. Taxable income coming from long term & dividends
c. Total Federal Tax owned
d. Marginal Tax rate
e. Average Tax rate
Tax rate Taxable income Tax owed
10% $0 to $9,525 10%
12% $9,526 to $38,700 $95250 plus 12% over the amount over 9525
22% $38,701 to$82,500 $4453.30 plus 22% of the amount over 38701
24% $82,501 to $157,500 $14089.50 plus 24% of the amount over $82500
32% $157,501 to $200,000 $32089.5 plus 32% of the amount over $157500
35% $200,001 to $500,000 $45689.5 plus 35% of the amount over $200000
37% $500,001 or more $150689.50 plus 37% of the amount over$500000

Answer 1

a. Taxable income coming from short term

= $102,000 + $5,000 + ($10,000 - $7,500) = $109,500

b. Taxable income coming from long term & dividends

= $750 + $16,000 + ($17,000 - $8,000) = $25,750

dividends are taxed as ordinary income, only long term capital gains are taxed at 15%

c. Total Federal Tax owned

ordinary income = $126,250 - $12,000 = $114,250

long term capital gains = $9,000

ordinary tax liability = $14,089.50 + [24% x ($114,250 - $82,500)] = $21,709.50

long term capital gains = $9,000 x 15% = $1,350

total tax liability = $23,059.50

d. Marginal Tax rate

24%

e. Average Tax rate

$21,709.50 / $114,250 = 19%