Question

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 $80,800. How much additional tax will you owe if you increase your taxable income by $22,000?

Answer 1

When taxable income is $80,800

Calculation of Tax amount

First $50,000

= $50,000 * 15%

= $7500

Next $25,000 (50,001 to $75,000)

= $25,000 * 25%

= $6250
Balance $5800 ($75,001 to $80,800)

= $5800 * 34%

= $1972
Total tax amount = $7500 + $6250 + $1972
= $15,722

When taxable income is $102,800 ($80,800 + $22,000)

First $50,000

= $50,000 * 15%

= $7500

Next $25,000 (50,001 to $75,000)

= $25,000 * 25%

= $6250

Next $25,000 ($75,001 to $100,000)

= $25,000 * 34%

= $8500

Balance $2800 ($100,001 to $102,800)

= $2800 * 39%

= $1092

Total tax amount = $7500 + $6250 + $8500 + $1092

= $23,340

Additional tax amount = $23,340 - $15,722

= $7618