Question

Which characteristics apply to the alternative minimum tax (AMT)? Applies to the alternative minimum tax Does not apply to the alternative minimum tax 0 is increasingly affecting fewer families allows for many deductions exists alongside the normal tax code establishes a base tax rate Answer Bank

Answer 1

1. AMT that is the alternative minimum tax that operates alongside the regular income tax. It makes some of the tax payers to calculate their liabilities twice which make them pay the higher amount. In order to calculate the AMT, preferential deductions are added back into the taxpayer's income. The required table is as follow: Applies to the alternative minimum tax establishes bas tax rate exists alongside the normal tax code Does not apply to the alternative minimum tax allows for many deductions is increasinginly affecting fewer families 2. a. Family B Income is $25000 Calculate the average tax rate and marginal tax rate. marginal tax rate is 31%. Calculate the total income tax for job as follows: total income tax = 0%(20000) +31%(25000– 20000) = 0+31%(5000) %3D = $1550 average tax is the total income tax paid to the total income. income tax paid 1550 -x100 = 6.2% 25000 Ex 100= average tax = total income Average tax rate: 6% and Marginal tax rate: 31%

b. Family S Income is $48000 Calculate the average tax rate and marginal tax rate. marginal tax rate is 42%. Calculate the total income tax for job as follows: = 0%(20000) +31%(39000 – 20000) + 42%(48000– 39000) total income tax = 0+31%(19000) +42%(9000) = 5890 +3780 = $9670 average tax is the total income tax paid to the total income. income tax paid 9670 x100 = 20.14% Ex100 = average tax = total income 48000 Average tax rate: 20% and Marginal tax rate: 42% c. Family W Income is $62000 Calculate the average tax rate and marginal tax rate. marginal tax rate is 42%. Calculate the total income tax for job as follows: total income tax = 0%(20000) +31%(39000 – 20000) +42%(62000– 39000) = 0+31%(19000) +42%(23000) = 5890 +9660 = $15550 average tax is the total income tax paid to the total income.

income tax paid 15550 Javerage tax =: x 100 = 25.08% Ex 100 = total income 62000 Average tax rate: 25% and Marginal tax rate: 42% d. Family L Income is $123000 Calculate the average tax rate and marginal tax rate. marginal tax rate is 50%. Calculate the total income tax for job as follows: total income tax = 0%(20000) +31%(39000 – 20000) +42%(70000– 39000) +50%(123000 – 70000) = 0+31%(19000) + 42%(31000) +50%(53000) = 5890 +13020+26500 = $45410 average tax is the total income tax paid to the total income. income tax paid 45410 -x100 = 36.91% x100= average tax = 123000 total income Average tax rate: 37% and Marginal tax rate: 50%