Question
Asked Jan 30, 2019
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Beatrice, age 12, is a dependent of her parents. She earned wages of 1500 and had taxable interest of 6500. Her parents tax rate is 33%. What is her taxable income?

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Expert Answer

Since Beatrice is a dependent minor, her taxable income would be calculated as per section 1(j)(4) of Tax Cuts and Jobs Act (TCJA).

 

The taxable income for Beatrice can be calculated as follows :

Earned Income

1500

Unearned Income

6500

 

 

Gross Income

8000

 

 

Standard Deduction u/s 63(c)(5)(A)

(Higher of:

A)1050 or,

B)Earned Income + 350 i.e. 1,500 + 350

 

 

(1850)

Taxable Income

(The entire $6,150 is treated as unearned income because his $1,850 standard deduction offsets all of his earned income plus the first $350 of his unearned income.)

6150

Tax Payable

 

The first $2,100 (the amount up to the kiddie tax unearned income threshold) is taxed at 10% under the regular rates for single taxpayers, resulting in $210 of tax.

 

For the remaining 4050 :

 

(10% on 0 to 2550)

...

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