Angelena files as a head of household. In 2020, she reported $56,300 of taxable income, including a $16,000 qualified dividend. What is her gross tax liability? (Round your answer to the nearest whole dollar amount.)(Use the tax rate schedules, long-term capital gains tax brackets)

Question

Quizplus · Accepted Answer

Angelena's gross tax liability can be calculated by considering both her ordinary income and her qualified dividends. For 2020, the tax rates for a head of household on ordinary income up to $53,700 (the portion of her income not including the qualified dividends) would be calculated using the relevant tax brackets. The qualified dividends of $16,000 are taxed at the long-term capital gains rates, which are lower than the ordinary income tax rates for most taxpayers. Given the information and the need to apply both ordinary income tax rates and the favorable long-term capital gains rates on the qualified dividends, the correct calculation leads to a gross tax liability of $4,959. This accounts for the progressive nature of the tax system and the preferential treatment of qualified dividends.

Angelena Files as a Head of Household