Answer:
Tax Due by Jeremy is $218
Explanation:
Step 1: Calculate Jeremy's total Income
$100,000 (Salary) + $6,000 (Interest Income) + $4,000 (long term capital gain)= $110,000
Jeremy's exclusion at this point is 0.
Therefore, Jeremy's Gross income = $110,000, This is also Jeremy's Adjusted Gross Income (AGI).
Step 2: Calculate Taxable Income after deductions.
AGI= $110,000
Deductions from AGI= $23,000 (The greater of standard or itemized deduction).
Qualified Business Income Deductions (QBI)= $0 (Jeremy did not declare any personal business).
Taxable Income= AGI-Deductions- QBI Deductions
= $110,000-$23,000-0
= $87,000
Step 3: Calculate Jeremy's Tax Liability as follows:
Capital Gain is included as part of Gross Income, therefore finding the tax liability will necesitate that the capital gain be deducted and only the taxable percentage be added back.
Jeremy's tax liability = (87,000-4,000) + (4,000 x 0.15)
= ($83,000 x 15.4%) + 600
=$12,818 + 600
=$13,418
Jeremy's total tax Liability= $13,418 - $0 (non refundable tax credit) + 0 (other taxes)
Jeremy's total tax liability = $13,418
The total tax payment made by Jeremy
=(2,000 + 11,200)= $13,200
Therefore the tax due by Jeremy is Total Tax Liability - Tax Payment mande
= $13,418 - $13,200
= $218
