Question

In: Finance

Tax Table Rate $0 $9,525 10% $9,525 $38,700 12% $38,700 $82,500 22% $82,500 $157,500 24% $157,500...

Tax Table Rate
$0 $9,525 10%
$9,525 $38,700 12%
$38,700 $82,500 22%
$82,500 $157,500 24%
$157,500 $200,000 32%

Given the tax table provided, compute the tax on $27,005 of taxable income.

Answer to the nearest dollar, use commas when appropriate, but do not include the $ in your answer.

Solutions

Expert Solution

Tax calculation is as follows:

Lower limit Upper limit Tax rate Income taxable in this bracket Tax Remaining income
                       -             9,525.00        0.10                9,525.00                    952.50                    17,480.00
          9,525.00         38,700.00        0.12              17,480.00                2,097.60                                    -  
        38,700.00         82,500.00        0.22                             -                               -                                      -  
        82,500.00     1,57,500.00        0.24                             -                               -                                      -  
    1,57,500.00     2,00,000.00        0.32                             -                               -                                      -  
Total 27,005.00 3,050.10

Income taxable in this bracket = upper limit - lower limit of the bracket
Tax = Income taxable in this bracket x Tax rate of the bracket
Remaining income = EBT- Total income taxed in all previous brackets
So total tax payable =  3,050.10 os 3,050 rounded to the nearest dollar


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