2. Taxes paid for a given income level Poornima is getting ready to do her taxes. She is single and lives in Detroit. Poornima earned $50,000 in taxable income in 2015. She reviews the following table, which shows the IRS tax rates for a single taxpayer in 2015. On Annual Taxable Income... Up to $9,225 From $9,225 to $37,450 From $37,450 to $90,750 From $90,750 to $189,300 From $189,300 to $411,500 From $411,500 to $413,200 Over $413,200 The Tax Rate Is... (Percent) 10.0 15.0 25.0 28.0 33.0 35.0 39.6 Based on the IRS table, Poornima calculates that her marginal tax rate is Poornima calculates that she owes Poornima then calculates that her average tax rate is when her annual taxable income is $50,000. in income taxes for 2015. based on the annual income level and the amount of taxes she owes for 2015. After figuring out what she owes in taxes in 2015, Poornima decides to ask an accountant for tax advice. The accountant claims that he has found legal way to shelter $4,000 of taxable income from the federal government. (Hint: Sheltering The maximum amount that Poornima is willing to pay to learn this strategy and reduce her taxable income by $4,000 is some income means finding a legal way to avoid being charged income tax on that income. For example, someone who has $50,000 in taxable income and shelters $10,000 pays income tax on only $40,000.)
2. Taxes paid for a given income level Poornima is getting ready to do her taxes. She is single and lives in Detroit. Poornima earned $50,000 in taxable income in 2015. She reviews the following table, which shows the IRS tax rates for a single taxpayer in 2015. On Annual Taxable Income... Up to $9,225 From $9,225 to $37,450 From $37,450 to $90,750 From $90,750 to $189,300 From $189,300 to $411,500 From $411,500 to $413,200 Over $413,200 The Tax Rate Is... (Percent) 10.0 15.0 25.0 28.0 33.0 35.0 39.6 Based on the IRS table, Poornima calculates that her marginal tax rate is Poornima calculates that she owes Poornima then calculates that her average tax rate is when her annual taxable income is $50,000. in income taxes for 2015. based on the annual income level and the amount of taxes she owes for 2015. After figuring out what she owes in taxes in 2015, Poornima decides to ask an accountant for tax advice. The accountant claims that he has found legal way to shelter $4,000 of taxable income from the federal government. (Hint: Sheltering The maximum amount that Poornima is willing to pay to learn this strategy and reduce her taxable income by $4,000 is some income means finding a legal way to avoid being charged income tax on that income. For example, someone who has $50,000 in taxable income and shelters $10,000 pays income tax on only $40,000.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:2. Taxes paid for a given income level
Poornima is getting ready to do her taxes. She is single and lives in Detroit. Poornima earned $50,000 in taxable income in 2015. She reviews the
following table, which shows the IRS tax rates for a single taxpayer in 2015.
On Annual Taxable Income...
Up to $9,225
From $9,225 to $37,450
From $37,450 to $90,750
From $90,750 to $189,300
From $189,300 to $411,500
From $411,500 to $413,200
Over $413,200
The Tax Rate Is...
(Percent)
10.0
15.0
Poornima calculates that she owes
25.0
28.0
33.0
35.0
39.6
Based on the IRS table, Poornima calculates that her marginal tax rate is
Poornima then calculates that her average tax rate is
when her annual taxable income is $50,000.
in income taxes for 2015.
, based on the annual income level and the amount of taxes she owes for 2015.
After figuring out what she owes in taxes in 2015, Poornima decides to ask an accountant for tax advice. The accountant claims that he has found legal
way to shelter $4,000 of taxable income from the federal government.
The maximum amount that Poornima is willing to pay to learn this strategy and reduce her taxable income by $4,000 is
(Hint: Sheltering
some income means finding a legal way to avoid being charged income tax on that income. For example, someone who has $50,000 in taxable income
and shelters $10,000 pays income tax on only $40,000.)
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