Question

< Back to Assignment Attempts: Average: 74 2. Taxes paid for a given income level Megan is getting ready to do her taxes. She is single and lives in Miami. Megan earned $110,000 in taxable income in 2015. She reviews the following table, which shows the IRS tax rates for a single taxpayer in 2015. On Annual Taxable Income... Up to $9,225 From $9,225 to $37,450 From $37,450 to $90,750 From $90,750 to $189,300 From $189,300 to $411,500 From $411,500 to $413,200 Over $413,200 The Tax Rate IS... (Percent) 10.0 15.0 25.0 28.0 33.0 35.0 39.6 MKT Based on the IRS table, Megan calculates that her marginal tax rate is 33% when her annual taxable income is $110,000. search

Hi, I'm just having some trouble with the last 3 sub questions. Thanks

Answer 1

Solution:-

Taxable income = $ 110,000

Marginal tax rate = 28%

Income tax owed = 10% x 9225 + 15% x (37450 - 9225) + 25% x (90,750 - 37450) + 28% * (110,000 – 90,750)

                           = 922.5 + 4233.75 + 13325 + 5390

Income tax owed   = $ 23,871.25

Average tax rate = income tax owed/taxable income x 100

                           = 23,871.25 / 110,000

                           = 21.71% = 22%(approx..)

Thus Average tax rate is 22%

Sheltering $ 2000 would keep Dina in the same bracket of 28%:

Maximum she would be willing to pay = 2000 x 28% = $560