This Table Shows the Total Tax Paid ($) on Annual Taxable Income. For
This table shows the total tax paid ($) on annual taxable income. For example, a person with an annual taxable income of $60,000 will pay $4,990 plus 25% of ($60,000 - $36,250) Total Tax Paid ($) at the top of this taxable Annual Taxable Income Bracket ($) Tax Rate income bracket 0 - 8,950 10% 895 8,950 - 36,250 15% 4,990 36,250 - 87,850 25% 17,890 87,850 - 183,250 28% 44,602 183,250 - 400,000 33% 116,129 400,000 and over 39.6% Question 1 Bill has an annual taxable income of $28,950. The income tax, to the nearest $, he has to pay is: A. $2,895 B. $3,895 C. $4,342 D. $4,510 E. $5,237 Answer 1 It is very easy to get the wrong answer if the question is not read carefully and make the incorrect assumption of placing Bill's income into the $8,950-36,250 income bracket and taxing his entire salary at 15%. 0.15 x 28,950 = $4342.5 By reading the example they give in the question 'For example, a person with an annual taxable income of $60,000 will pay $4,990 plus 25% of ($60,000 - $36,250)' it is clear that each part of their salary is taxed at a separate rate. To get the correct answer we need to divide his total salary into the correct brackets and calculate the allocated tax for each part. His salary is $28,950 which means $8,950 is taxed in the first bracket (10% tax) and the remaining $20,000 is taxed in the second bracket (15% tax).
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