Derek,a single taxpayer,has AGI of $55,200 which includes $5,000 of qualified dividends.Derek does not itemize deductions.What is his 2019 federal income tax?
A)$4,366
B)$4,910
C)$5,116
D)None of the above

Question

Quizplus · Accepted Answer

To calculate Derek's federal income tax, we first need to determine his taxable income. Since Derek does not itemize deductions, he will take the standard deduction for a single taxpayer, which is $12,200 for the 2019 tax year.

Derek's taxable income is therefore:

$55,200 (AGI) - $12,200 (standard deduction) = $43,000

To calculate his tax liability, we can use the 2019 tax rate schedules:

- 10% on the first $9,700 of taxable income: $970
- 12% on taxable income over $9,700 but not over $39,475: $3,288
- 22% on taxable income over $39,475 but not over $84,200: $1,652.50

Derek's qualified dividends are taxed at a lower rate than his ordinary income, but we need to include them in our calculations. Qualified dividends are taxed at a maximum rate of 20%, but because Derek's taxable income is less than $39,375 ($52,750 for a married couple filing jointly), his qualified dividends are taxed at a 0% rate.

Derek's total tax liability is therefore:

$970 (10% on first $9,700) + $3,288 (12% on $9,701-$39,475) + $0 (0% on $5,000 of qualified dividends) + $1,652.50 (22% on $39,476-$43,000) = $5,910.50

However, Derek may be eligible for a credit for a portion of his qualified dividends, which could reduce his tax liability. Without further information, we cannot know for certain whether he qualifies for this credit.

Derek,a Single Taxpayer,has AGI of $55,200 Which Includes $5,000 of Qualified