Dependent daughter had unearned income. She must then use parent tax rate. Her taxable income=$6,896. Parent tax rate=13.4%. 13.4% X $6896=$924. Turbotax shows $1,798?

Why is her total tax figured incorrectly?

posted

The tax is computed on the parents marginal tax rate, not blended rate. The marginal tax rate is the rate of tax the parent would pay if they earned $1 of additional income. That being said, if you are in the 24% tax bracket and the additional income pushed you into the 32% tax bracket, she could be taxed at $1798, which is approximately 26%. Depending on the parent net investment income and gross AGI, there could also be net investment income tax included in that amount.