Augustine is an international student from Trinidad who made income of $4,500 for the year. In 2020, he gave $450 to support his local church, paid $50 in state income taxes, and has a $2,000 tax treaty.
Add up the deductions
First, let us determine how much deductions Augustine has. Since contributions to nonprofit organizations are deductible, he can use the full amount as a deduction. Next, the full amount of $50 paid in state taxes can be deducted. Finally, his tax treaty amount can be deducted. Since all payments are fully deductible, Augustine has a total deduction of $2,500.
Subtract the total deductions from income
Now, let’s apply the deductions to his return. Simply subtract the deduction amount of $2,500 from his total income of $4,500. This leaves $2,000 left to pay taxes on. Since $2,000 falls into the 10% tax bracket, the amount of tax he is required to pay is $200.
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