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Gita is a single taxpayer earning [tex]\$50,000[/tex] in wages this year. In addition, she received [tex]\$750[/tex] in nonqualified dividends and [tex]\[tex]$2,500[/tex] in capital gains from a stock she held for 10 months.

Use the following tables to complete the statement.

\begin{tabular}{|r|r|}
\hline
\multicolumn{2}{|c|}{Single Taxpayers: Income Brackets} \\
\hline
Tax Rate & Income Bracket \\
\hline
$[/tex]10\%[tex]$ & $[/tex]0[tex]$ to $[/tex]9,525[tex]$ \\
\hline
$[/tex]12\%[tex]$ & $[/tex]9,526[tex]$ to $[/tex]38,700[tex]$ \\
\hline
$[/tex]22\%[tex]$ & $[/tex]38,701[tex]$ to $[/tex]82,500[tex]$ \\
\hline
$[/tex]24\%[tex]$ & $[/tex]82,501[tex]$ to $[/tex]157,500[tex]$ \\
\hline
$[/tex]32\%[tex]$ & $[/tex]157,501[tex]$ to $[/tex]200,000[tex]$ \\
\hline
$[/tex]35\%[tex]$ & $[/tex]200,001[tex]$ to $[/tex]500,000[tex]$ \\
\hline
$[/tex]37\%[tex]$ & $[/tex]>500,000[tex]$ \\
\hline
\end{tabular}

\begin{tabular}{|r|r|}
\hline
\multicolumn{2}{|c|}{\begin{tabular}{l}
Single Taxpayers: Qualified \\
Dividends and Long-Term \\
Capital Gains
\end{tabular}} \\
\hline
Tax Rate & Income Bracket \\
\hline
$[/tex]0\%[tex]$ & $[/tex]0[tex]$ to $[/tex]38,600[tex]$ \\
\hline
$[/tex]15\%[tex]$ & $[/tex]38,601[tex]$ to $[/tex]425,800[tex]$ \\
\hline
$[/tex]20\%[tex]$ & $[/tex]>425,800[tex]$ \\
\hline
\end{tabular}

Gita must pay $[/tex]\[tex]$[/tex] [tex]$\square$[/tex] in taxes on her investment income.



Answer :

GinnyAnswer
To determine how much Gita must pay in taxes on her investment income, we need to look at her nonqualified dividends and her short-term capital gains. Both of these are taxed at ordinary income rates.

Given:
- Wages: [tex]$50,000 - Nonqualified dividends: $[/tex]750
- Short-term capital gains: [tex]$2,500 - Combined nonqualified dividends and short-term capital gains: $[/tex]3,250

The tax brackets for single taxpayers are:
- 10% for income from [tex]$0 to $[/tex]9,525
- 12% for income from [tex]$9,526 to $[/tex]38,700
- 22% for income from [tex]$38,701 to $[/tex]82,500

Since investment income is taxed at ordinary income rates, we need to calculate the tax on [tex]$3,250. Here's the step-by-step breakdown of Gita's investment income tax: 1. The initial tax for the first portion of the income within the tax brackets. 2. Adding up the taxes from each portion according to the tax brackets. Thus, Gita must pay $[/tex]\[tex]$[/tex] 325.0 in taxes on her investment income.