Question

1. If Mrs. Smith buys an electric car and gets a federal income tax credit for $750, and her marginal tax bracket is 30 % , and she shows a tax liability before applying the savings from the credit of $1,000, she should be able to reduce her tax to...

Group of answer choices

$250

$775

$700

$175

2. If Mrs. Smith buys an electric car and gets a federal income tax deduction for $750, and her marginal tax bracket is 30 % , and she shows a tax liability before applying the savings from the credit of $1,000, she should be able to reduce her tax to...

Group of answer choices

$250

$775

$700

$175

Answer 1

Question - (1) -

Answer -

If Mrs. Smith buys an electric car and gets a federal income tax credit for $750, and her marginal tax bracket is 30%, and she shows a tax liability before applying the savings from the credit of $1000.

She should be able to reduce her tax to $250 [ $1000 - $ 250, that is her tax liability before applying the savings from the credit less income tax credit].

Hence, Option - (a) is Correct.

.

Question - (2) -

Answer -

If Mrs. Smith buys an electric car and gets a federal income tax deduction for $750, and her marginal tax bracket is 30%, and she shows a tax liability before applying the savings from the credit of $1000.

She should be able to reduce her tax to $775 [$1000 - ($750 * 30%)].

Hence, Option - (b) is Correct.