Chapter 4, Problem 1DTM

Calculate Tax Liability. What would be the tax liability for a single taxpayer who has a gross income of $50,050? (Hint: Use Table 4-3, and don’t forget to subtract the value of a standard deduction and one exemption.)

Summary Introduction

To calculate: Tax liability for a single taxpayer.

Introduction: Tax is payable on net taxable income. The income is taxed on the basis of slabs. Tax is calculated for each slab of the income separately. The tax slabs are determined by the government and these slabs keep changing from year to year.

Answer to Problem 1DTM

Tax liability for a single tax payer is $5696.25

Explanation of Solution

Tax liability for a single tax payer is calculated as follows:

Standard deduction of $6,300 and personal exemption of $4050, total $10,350 is not taxed. The tax on additional income 50,050 less 10350 = $39700 is calculated as follows:

Single individual if taxable income is	Rate	Amount	Tax
	A	B	= A*B
up to $9275	10%	$ 9,275	$ 927.50
over $9275 and up to $37650	15%	$ 28,375	$ 4,256.25
over $37650 and up to $91150	25%	$ 2,050	$ 512.50
Total		$ 39,700	$ 5,696.25