Question

Refer to the table below:

2016 Tax Data

Tax Bracket Marginal Tax Rate

$0–9,275 10%

$9,275–37,650 15%

$37,650–91,150 25%

$91,150–190,150 28%

$190,150–413,350 33%

$413,350–415,050 35%

Over $415,050 39.6%

Compute the taxable income and taxes for the following taxpayers:

Instructions: Enter your responses as a whole number.

Taxpayer	Gross Income	Exemptions and Deductions	Taxable Income	Tax
A	$20,000	$4,000	$	$
B	40,000	16,000
C	80,000	34,000
D	200,000	110,000

Answer 1

Taxpayer A:

Gross income = $20,000

Exemptions and Deductions = $4,000

Taxable Income = Gross income - Exemptions and Deductions = $20,000 - $4,000 = $16,000

Tax = 10% * $9,275 + 15% * ($16,000 - $9,275) = $1,936.25

Taxpayer B:

Gross income = $40,000

Exemptions and Deductions = $16,000

Taxable Income = Gross income - Exemptions and Deductions = $40,000 - $16,000 = $24,000

Tax = 10% * $9,275 + 15% * ($24,000 - $9,275) = $3,136.25

Taxpayer C:

Gross income = $80,000

Exemptions and Deductions = $34,000

Taxable Income = Gross income - Exemptions and Deductions = $80,000 - $34,000 = $46,000

Tax = 10% * $9,275 + 15% * ($37,650 - $9,275) + 25% * ($46,000 - $37,650) = $7,271.25

Taxpayer D:

Gross income = $200,000

Exemptions and Deductions = $110,000

Taxable Income = Gross income - Exemptions and Deductions = $200,000 - $110,000 = $90,000

Tax = 10% * $9,275 + 15% * ($37,650 - $9,275) + 25% * ($90,000 - $37,650) = $18,271.25