Subpart (a):
Gross income.
Subpart (a):
Explanation of Solution
The Gross income can be calculated as follows.
Gross income is $65,000.
Concept Introduction:
Gross income: It is an individual's income and the receipts from nearly all the sources.
Subpart (b):
Taxable income.
Subpart (b):
Explanation of Solution
The taxable income can be calculated as follows.
Taxable income is $51,900.
Concept Introduction:
Taxable income: It is the amount of income used to calculate an individual's or a company's income tax due.
Subpart (c):
New taxable income.
Subpart (c):
Explanation of Solution
New taxable income can be calculated as follows.
New taxable income is $46,000.
Concept Introduction:
Taxable income: It is the amount of income used to calculate an individual's or a company's income tax due.
Subpart (d):
Taxable income.
Subpart (d):
Explanation of Solution
Taxable income after the deduction can be calculated as follows.
Taxable income after deduction is $37,500.
Concept Introduction:
Taxable income: It is the amount of income used to calculate an individual's or a company's income tax due.
Subpart (e):
Tax payment.
Subpart (e):
Explanation of Solution
Table -1 shows the tax schedule.
Table -1
(1) Total Taxable income |
(2) Marginal tax rate, % |
$0 - $17,850 | 10 |
$17,851-$72,500 | 15 |
$72,501-$146,400 | 25 |
$146,401 - $223,050 | 28 |
$223,051-$398,350 | 33 |
398,351- $450,000 | 35 |
$450,001 and above | 39.6 |
Tax payment can be calculated as follows.
The total tax payment is $4,732.5. The tax rate for the last dollar is 15%. Thus, the marginal tax rate is 15%.
Concept Introduction:
Tax payment: It is the amount that an individual's or a company's income tax due.
Subpart (f):
Tax payment.
Subpart (f):
Explanation of Solution
The actual tax payment after the tax credit can be calculated as follows.
The actual tax payment is $3,732.5.
Average tax rate relative to the taxable income can be calculated as follows.
Average tax rate relative to the taxable income is 9.95%
Average tax rate relative to the total income can be calculated as follows.
Average tax rate relative to the taxable income is 5.74%.
Concept Introduction:
Tax payment: It is the amount that an individual's or a company's income tax due.
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