Question

pJimmy is a client of yours and he has some holdings in U.S. T-Bonds. Over the past year, he received $500 in interest from these bonds. His accountant has informed him that he is in the 28% tax bracket with all sources of income considered. He lives in the State of California, so his State Income Tax Rate is 9%. What kind of tax liability is Jimmy looking at in relation to the interest received from his U.S. T-Bonds

Answer 1

Answer:

Jimmy must pay federal income taxes for the $500 earned in dividends during last year = $500 x 28% = $140

Since interest earned on federal securities are not taxed by state or local governments, there is no state tax liability.

Jimmy's total taxes due from dividends earned = $140