Taxable Income Taxes $0 - $23,000 17% of taxable income $23,001 - $42,000 $3,900 + 20% of everything over $23,000 $42,001 - $100,000 $7,710 + 30% of everything over $42,000 Greater than $100,000 $25,110 + 33% of everything over $100,000 Refer to Exhibit 11-4. If a person’s taxable income is $30,000, how much does he pay in taxes?
a. $6,000
b. $1,400
c. $5,300
d. $4,85011-9
Answer: It is given that the taxable income of a person is $30,000 then 17% tax will be applicable up to $23,000 income as given in the first income bracket and $3,900 + 20% of ($30,000 - $23,000) will be paid as taxes as given in the second income bracket. So, the total tax paid is will equal the sum of taxes paid of income in first bracket plus the tax on income in second bracket.
Tax = 17% on 23,000 + 3,900 + 20% on 7,000
Tax = 3,910 + 3,900 + 1,400 = $9,210
So, the total amount paid as tax is $9,210.
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