Calculate the total tax (FICA and income taxes) owed by each individual in the following pair. Compare their overall tax rates. Assume that each individual is singleand takes the standard deduction. Use the tax rates in the table to the right and the special rates for the dividends and capital gains. Pierre earned $128,000 in wages. Katarina earned $128,000, all from dividends and long-term capital gains. Tax Rate Single 10% up to $9325 15% up to $37,950 25% up to $91,900 28% up to $191,650 33% up to $416,700 35% up to $418,400 39.6% above $418,400 Standard deduction $6350 Exemption (per person) $4050 For 2017, the FICA tax rates were 7.65% on the first $127,200 of income from wages and 1.45% on any income from wages in excess of $127,200. The tax rates for long-term capital gains and dividends were 0% for income in the 10% and 15% tax brackets, 15% for income in all higher brackets except the highest 39.6% bracket, and 20% for income in the 39.6% tax bracket. An additional Medicare tax applies to taxpayers with adjusted gross income above $200,000 for individuals (single or head of household) or $250,000 for married couples. Above these thresholds, the additional Medicare tax is 3.8% on most income that is not otherwise subject to FICA taxes, such as income from investments and dividends, or a 0.9% surcharge on ordinary income. The total tax owed by Pierre is $_____.

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter5: Gross Income: Exclusions

Section: Chapter Questions

Problem 55P

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Calculate the total tax (FICA and income taxes) owed by each individual in the following pair. Compare their overall tax rates. Assume that each individual is singleand takes the standard deduction. Use the tax rates in the table to the right and the special rates for the dividends and capital gains.

Pierre earned $128,000 in wages. Katarina earned $128,000, all from dividends and long-term capital gains.

Tax Rate	Single
10%		up to $9325
15%		up to $37,950
25%		up to $91,900
28%		up to $191,650
33%		up to $416,700
35%		up to $418,400
39.6%		above $418,400
Standard deduction		$6350
Exemption (per person)		$4050

For 2017, the FICA tax rates were 7.65% on the first $127,200 of income from wages and 1.45% on any income from wages in excess of $127,200. The tax rates for long-term capital gains and dividends were 0% for income in the 10% and 15% tax brackets, 15% for income in all higher brackets except the highest 39.6% bracket, and 20% for income in the 39.6% tax bracket. An additional Medicare tax applies to taxpayers with adjusted gross income above $200,000 for individuals (single or head of household) or $250,000 for married couples. Above these thresholds, the additional Medicare tax is 3.8% on most income that is not otherwise subject to FICA taxes, such as income from investments and dividends, or a 0.9% surcharge on ordinary income.

The total tax owed by Pierre is

$_____.

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