table, which shos the IRS tax rates tor a single taxpaer n 2015 The Tax Rate Is.
ID: 1118055 • Letter: T
Question
table, which shos the IRS tax rates tor a single taxpaer n 2015 The Tax Rate Is.. (Percenl On Annul Taxable l Lp to 0,225 From 9,225 to 537,450 From :37,450 tsoo,750 From s90·750 to 189,300 rom 51H9,300 to $411,500 From 5411,500 to 413,200o Over 8413,200 Based on the IRS t80ie, Dermell calculates th5t his mar7ral t rate i when hie annual t8 ble income is$110,000. n neometeoes for 2015. after figuring out what h·5Win t es in 2013, Dsmel derides tn 8ek an seruntantfor tax ®dvce. The scenuntant cairns that he h85 found 8 legal ,say to shelter2,000 of taxable income trom the federal government. The maximum amount that Demell is willing to pay to lesm this strateay and reduce his taxable incame by 2.000 isHInt: Shelterina and shelters $10,000 pays income tax on only $40,00D.)Explanation / Answer
With income being 110,000, marginal tax rate is 28%. His income taxes are amounted to:
9225*10% + (37450 - 9225)*15% + (90750 - 37450)*25% + (110000 - 90750)*28% = 23,871.25
Average tax rate = tax/income = 23,871.25/110000 = 21.071%.
In case he can reduce the taxable income by 2000, the new income tax is
9225*10% + (37450 - 9225)*15% + (90750 - 37450)*25% + (108000 - 90750)*28% = 20,511.25. Taxes are now reduced by $560 so he can pay a maximum of $560.
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