Question

In 2013 Bill earned $55,000 gross income and rented an apt for $1,000 per month. Given...

In 2013 Bill earned $55,000 gross income and rented an apt for $1,000 per month. Given this is all the information you have, 25% tax rate, no other deductions and a standard deduction of $5,000. What are his total taxes due, his marginal rate, his average rate, and how much was his monthly take home pay?

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Answer #1

Answer:

Note: There is no tax deduction on rent paid, in US, so we have used only 5,000 standard deduction as total deduction from gross income

Total taxes due: As done in the table below, total taxes due = $12,500

Marginal tax rate: The marginal tax rate is the percentage of tax applied to your income for each tax bracket in which you qualify. Since we are not assuming any other tax bracket here. so marginal tax rate is 25%

Average tax rate: Average tax rate is the total tax paid dividend by total taxable income. so here it will be 25% as there are no other tax brackets.

Monthly take home pay: As done in below table, monthly take home pay = $3,125 (before rent paid)

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