1. Calculate your total tax liability under the 2013 federal income tax structur
ID: 1181140 • Letter: 1
Question
1. Calculate your total tax liability under the 2013 federal income tax structure, assuming your income is $75,000. Assume you are single and using the personal exemption of $3,900 and the standard deduction of $6,100. Show your work.
2013 Tax Schedule
Taxable Income
Rate
$0-$8925
10%
$8950-$36250
15%
$36250-$87,850
25%
$87,850-$183,250
28%
$183,250-$398,350
33%
$398,250-$400,000
35%
$400,000 and up
39.60%
2. Calculate your effective tax rate. Show your work.
3. You have an opportunity to do some extra work that will pay you $5,000. Determine your marginal tax rate for the extra compensation.
2013 Tax Schedule
Taxable Income
Rate
$0-$8925
10%
$8950-$36250
15%
$36250-$87,850
25%
$87,850-$183,250
28%
$183,250-$398,350
33%
$398,250-$400,000
35%
$400,000 and up
39.60%
Calculate your total tax liability under the 2013 federal income tax structure, assuming your income is $75,000. Assume you are single and using the personal exemption of $3,900 and the standard deduction of $6,100. Show your work. Calculate your effective tax rate. Show your work. You have an opportunity to do some extra work that will pay you $5,000. Determine your marginal tax rate for the extra compensation.Explanation / Answer
Answer edited
Income = $75,000
Taxable income = Income - Personal exemption - Standard deduction
= $75,000 - $3,900 - $6,100
= $65,000
This falls in the category $36,250 - $87,850 with a rate of 25% on taxable income.
=> Tax liability = Summation(Tax rate * Taxable income) across the taxable income brackets.
= 10%*8,925 + 15% * (36,250 - 8,925) + 25%*(60,000- 36,250)
= $10,928.75
2) Effective tax rate = Tax liability/Income
= 10,928.75/75,000
= 14.57%
3) New taxable income = $65,000 + $5,000 = $70,000 - still in the same tax bracket.
So, applicable tax rate = 25% for this additional income
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