Shannon is 16 years old and is a qualified dependent of her mother.Shannon earns $1,500 as a counselor at a church summer camp and receives $2,500 of interest on a savings account established by her grandparents.Shannon's 2013 taxable income is:

Question

Quizplus · Accepted Answer

As a dependent, Shannon's standard deduction is $1,000 and her personal exemption is $0 (since she can be claimed as a dependent by her mother). Therefore, her taxable income is calculated as follows: 
$1,500 (earned income) + $2,500 (unearned income) - $1,000 (standard deduction) = $2,000 
Since Shannon is under the age of 18, she is subject to special "kiddie tax" rules that tax unearned income over $2,000 at her parent's tax rate. However, since her unearned income is only $2,500, it does not exceed this threshold and is not subject to the kiddie tax. Therefore, her taxable income for 2013 is $2,000, making choice C the correct answer.

Shannon Is 16 Years Old and Is a Qualified Dependent