Question

The tax rates are as shown below: Taxable Income Tax Rate $0 – 50,000 15 %...

The tax rates are as shown below:

Taxable Income Tax Rate
$0 – 50,000 15 %
50,001 – 75,000 25 %
75,001 – 100,000 34 %
100,001 – 335,000 39 %


Your firm currently has taxable income of $81,400. How much additional tax will you owe if you increase your taxable income by $22,600?

a. $7,504

b. $7,884

c. $7,494

d. $7,684

e. $8,814

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Homework Answers

Answer #1

Answer :

Previous Tax = [ 0.15 * 50,000 ] + [ 0.25 * ( 75,000 - 50,000 ) ] + [ 0.34 * 6,400 ]

= $ 7,500 + $ 6,250 + $ 2,176

= $ 15,926

Now taxable income = [ $ 81,400 + $ 22,600 ] = $ 104,000

Present Tax = [ 0.15 * 50,000 ] + [ 0.25 * ( 75,000 - 50,000 ) ] + [ 0.34 * ( 100,000 - 75,000 ) ] + [ 0.39 * 4,000 ]

   = $ 7,500 + $ 6,250 + $ 8,500 + $ 1,560

   = $ 23,180

Additional tax = [ $ 23,180 - $ 15,926 ] = $ 7,884

The answer is option (b) i.e., $ 7,884.

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