Tony's marginal income tax rate is 30% and he is subject to FICA taxes of 7.65%...
Tony's marginal income tax rate is 30% and he is subject to FICA taxes of 7.65% on all his wages. His employer offered him a choice between an additional 5000 of cash or non taxable fringe benefits that would cost tony 3000 to purchase directly. If he takes the cash and pays for the benefit himself, how much better off worse off is he? a- 500 better off b- 117 better off c- 500 worse off d- 117 worse off
Homework Answers
Answer b) 117 better off
Explanation:
Case 1) If he takes the cash and pays for the benefit
himself:
Total Taxable amount = Marginal Income tax on Additional Cash +
FICA taxes on additional wages
= .3 *5000 + 0.0765* 5000
= 1500+382.5 = 1882.5
Thus, total cash left with Tony = 3117.5
Case 2) Non taxable fringe benefit would provide benefit to Tony
to the extent of 3000.
Hence, he is clearly better off in Case 1).
Note: FICA taxes will be calculated on his entire
additional wages before income tax.
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tax tables:
Rates and allowances
INCOME TAX (2018/19)
%
Basic rate £1 – £34,500 20%
Higher rate £34,500 – £150,000 40%
Additional higher rate £150,001 onwards 45%
A starting rate of 10% applies to savings income where it falls
within the first £5,000 of taxable income.
Personal allowances (2018/19)
£
Personal allowance 11,850
Car fuel benefit (2018/19)
The base figure for calculating the car fuel benefit is
£23,400.
Approved mileage rates (2018/19)
Car and vans: 0 – 10,000 miles 45p...
Use the marginal income tax rates shown here to calculate the
average tax rate on an income of $100,000.
Taxable Income
Tax rate
$0–$8,700
10%
$8,700–$35,350
15%
$35,350–$85,650
25%
$85,650–$178,650
28%
$178,650–$388,350
33%
Over $388,350
35%
Average tax rate on $100,000 of income is ____________.
21.46%
24.27%
28.00%
10.5 points
QUESTION 2
Use the marginal income tax rates shown here to calculate the
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Tax rate
$0–$8,700
10%
$8,700–$35,350
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