Question

A local engineering firm here in Stillwater does residential development planning for the City of Stillwater. Their primary services are street design, stormwater run-off, and municipal water/sewage system design. Their taxable income last year was $250,000 primarily from the North Country Club Drive project. This year they expect to increase their taxable income by an additional $175,000 from the Western Road project and expansion in the Berry Hill housing addition. What is the marginal tax rate for this year's taxable income? 34.00% 39.00% 40.00% O 25.00%

Answer 1

over 15/- Solution :- Below table clearly shows the tan rates. for taxable But not Taxrate (-/-) income over $ 50,000 $ 50,000 $75,000 251 $ 751000 $100,000 34-4- $ 100,000 $335,000 390) $ 335,000 10,000,000 $ 340/ - For year1 : Taxable income $250,000 Tax IPabiifty= ($50000 x 15-1)+(25000X 25 +$25,000 X 34-1)+ ($ 150,000 X 34-1) = $(7,50076250+ 8,500 +58,500) $ 80,750 > Present year: Taxable pricomes --$250,000 + $ 175,000 = $425,000 Tax IP aube ifty = ($50,000x 0-19)+($25,000X0:25) ($235,00000-39) + $90,000 x 0-34 = $(7,500T 6,2501&500+91,60+39,600 + C$25,00 OX 0-24)+ce = $ 144, 500

7 Marginal tan sate for this year is the tare rate on the last dolloo easoned. For this year the last tan sate. Cupplied is 34.00% [option / ை Incremental tax rate for this year Incremental taxable = $(425,000-250,000) income $ 175,000 Incremental tax =$ 144,500 – $80,350 liability = $ 63,750 = Incremental tax = (Incremental tax liability rate (Incremental taxable income) s $631750 $ 115,000 lv 036428 M100 1 = 36-4301

Effective tax rate for = Income tax 1st year Taxable Income = $80,750 $ 250,000 = 0-323 X 100 " ) = 39-3% effective tax rate for this year= Income tax Taxable income = $ 1445oo $425,000 34000)