If the federal government used the progressive tax rate below for individual income tax, complete the table to calculate the federal income tax owed on a $49,500 salary ($37,300 in taxable income).
| | | 12,200 | |
| :------------------ | :------------------ | :--------------------: | :----: |
| Income Range ($) | Progressive Tax Rate | Taxable Income ($) | Income Tax Owed ($) |
| 0-9,700 | 10% | 9,700 | 970.00 |
| 9,701-39,475 | 12% | 27,600 | [?] |
| 39,476-84,200 | 22% | - | |
| 84,201-160,275 | 24% | | |
| 160,276+ | 32% | | |
| | Total | 37,300 | |
Answer (2)
Calculate the tax owed in the second bracket: 0.12 × 27600 = 3312 .
The taxable income in the third, fourth, and fifth brackets is $0 since the total taxable income is $37,300.
Calculate the total income tax owed: 970 + 3312 + 0 + 0 + 0 = 4282 .
The total federal income tax owed on a $49,500 salary with 37 , 300 t a x ab l e in co m e i s \boxed{4282}$.
Explanation
Understanding the Problem We are given a progressive tax rate table and need to calculate the federal income tax owed on a $49,500 salary, with a taxable income of $37,300 after a standard deduction of $12,200. The tax brackets are provided, and we need to fill in the missing income tax owed for the second tax bracket and complete the table.
Analyzing the First Tax Bracket The first tax bracket is from $0 to $9,700, with a 10% tax rate. The taxable income in this bracket is $9,700, and the tax owed is $970.00, as given in the table.
Calculating Taxable Income in the Second Bracket The second tax bracket is from $9,701 to $39,475, with a 12% tax rate. To find the taxable income in this bracket, we subtract the upper limit of the first bracket from our total taxable income: $37,300 - $9,700 = $27,600.
Calculating Tax Owed in the Second Bracket Now, we calculate the income tax owed in the second tax bracket by multiplying the taxable income in this bracket by the tax rate: T a x 2 = 0.12 × 27600 = 3312 .
Analyzing the Third Tax Bracket The third tax bracket is from $39,476 to $84,200, with a 22% tax rate. Since our total taxable income is $37,300, which is less than $39,476, the taxable income in this bracket is $0.
Analyzing the Fourth Tax Bracket The fourth tax bracket is from $84,201 to $160,275, with a 24% tax rate. Since our total taxable income is less than $84,201, the taxable income in this bracket is $0.
Analyzing the Fifth Tax Bracket The fifth tax bracket is for income $160,276 and above, with a 32% tax rate. Since our total taxable income is less than $160,276, the taxable income in this bracket is $0.
Calculating Total Income Tax Owed The total income tax owed is the sum of the income tax owed in each bracket: T o t a lT a x = T a x 1 + T a x 2 + T a x 3 + T a x 4 + T a x 5 = 970 + 3312 + 0 + 0 + 0 = 4282 .
Final Answer Therefore, the income tax owed in the second tax bracket is $3312.00, and the total income tax owed is $4282.00.
Examples
Understanding progressive tax rates is crucial for personal finance. For instance, if you're planning to start a small business and project your income, knowing how different income levels are taxed helps you estimate your tax obligations accurately. This allows for better financial planning, such as setting aside enough money for taxes or making informed decisions about investments and expenses. By understanding these tax brackets, you can also explore strategies to minimize your tax liability within legal boundaries, contributing to more effective financial management.
The federal income tax owed on a $49,500 salary with a taxable income of $37,300 is $4,282, calculated from the first two applicable tax brackets. The tax owed in the first bracket is $970 and in the second bracket is $3,312. The total income tax combines these amounts for a final tax amount of $4,282.
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