Questions: Tom made 25,000 in taxable income last year. Suppose the income tax rate is 15% for the first 8,000 plus 18% for the amount over 8,000. How much must Tom pay in income tax for last year?

Solution Steps

The tax rate for the first $8,000 is $15\%$. Therefore, the tax amount for this portion is: \[ \text{Tax}_1 = 8,000 \times 0.15 = 1,200 \]

Tom's total taxable income is $25,000$. The amount above $8,000$ is: \[ \text{Taxable Income Above } 8,000 = 25,000 - 8,000 = 17,000 \]

The tax rate for the amount above $8,000$ is $18\%$. Therefore, the tax amount for this portion is: \[ \text{Tax}_2 = 17,000 \times 0.18 = 3,060 \]

The total income tax Tom must pay is the sum of the tax for the first $8,000$ and the tax for the amount above $8,000$: \[ \text{Total Tax} = \text{Tax}_1 + \text{Tax}_2 = 1,200 + 3,060 = 4,260 \]

Final Answer