Questions: Use the marginal tax rates in the table below to compute the tax owed in the following situation. Paul is a head of household with a taxable income of 113,000. He is entitled to an 8000 tax credit. Tax Rate Head of Household 10% up to 13,350 15% up to 50,800 25% up to 131,200 28% up to 212,500 33% up to 416,700 35% up to 444,550 39.6% above 444,550 Standard deduction 9350 Exemption (per person) 4050 The tax owed is . (Type an integer or a decimal.)

Use the marginal tax rates in the table below to compute the tax owed in the following situation. Paul is a head of household with a taxable income of 113,000. He is entitled to an 8000 tax credit.

Tax Rate Head of Household
10% up to 13,350
15% up to 50,800
25% up to 131,200
28% up to 212,500
33% up to 416,700
35% up to 444,550
39.6% above 444,550
Standard deduction 9350
Exemption (per person) 4050

The tax owed is .
(Type an integer or a decimal.)

Transcript text: Use the marginal tax rates in the table below to compute the tax owed in the following situation. Paul is a head of household with a taxable income of $\$ 113,000$. He is entitled to an $\$ 8000$ tax credit. \begin{tabular}{|l|l|} \hline Tax Rate & Head of Household \\ \hline $10 \%$ & up to $\$ 13,350$ \\ \hline $15 \%$ & up to $\$ 50,800$ \\ \hline $25 \%$ & up to $\$ 131,200$ \\ \hline $28 \%$ & up to $\$ 212,500$ \\ \hline $33 \%$ & up to $\$ 416,700$ \\ \hline $35 \%$ & up to $\$ 444,550$ \\ \hline $39.6 \%$ & above $\$ 444,550$ \\ \hline Standard deduction & $\$ 9350$ \\ \hline \begin{tabular}{l} Exemption \\ (per person) \end{tabular} & $\$ 4050$ \\ \hline \end{tabular} The tax owed is $\$$ (Type an integer or a decimal.)

Solution

Solution Steps

To compute the tax owed, we need to follow these steps:

Calculate the taxable income after applying the standard deduction and exemptions.
Apply the marginal tax rates to the taxable income to determine the total tax before credits.
Subtract the tax credit from the total tax to get the final tax owed.

Step 1: Calculate Adjusted Taxable Income

To find the adjusted taxable income, we start with the taxable income and subtract the standard deduction and the exemption amount. The calculations are as follows:

\[ \text{Adjusted Taxable Income} = \text{Taxable Income} - \text{Standard Deduction} - (\text{Exemption per Person} \times \text{Number of Exemptions}) \]

Substituting the values:

\[ \text{Adjusted Taxable Income} = 113000 - 9350 - (4050 \times 1) = 113000 - 9350 - 4050 = 99600 \]

Step 2: Calculate Tax Before Credits

Next, we apply the marginal tax rates to the adjusted taxable income of $ 99600 $. The tax brackets are as follows:

$ 10\% $ on income up to $ 13350 $
$ 15\% $ on income up to $ 50800 $
$ 25\% $ on income up to $ 131200 $

Calculating the tax for each bracket:

For the first bracket: \[ \text{Tax}_{1} = 13350 \times 0.10 = 1335 \]
For the second bracket: \[ \text{Tax}_{2} = (50800 - 13350) \times 0.15 = 37450 \times 0.15 = 5617.5 \]
For the third bracket: \[ \text{Tax}_{3} = (99600 - 50800) \times 0.25 = 48800 \times 0.25 = 12200 \]

Adding these amounts together gives the total tax before credits:

\[ \text{Tax Before Credits} = 1335 + 5617.5 + 12200 = 19152.5 \]

Step 3: Calculate Final Tax Owed

Finally, we subtract the tax credit from the total tax calculated:

\[ \text{Final Tax Owed} = \text{Tax Before Credits} - \text{Tax Credit} \]

Substituting the values:

\[ \text{Final Tax Owed} = 19152.5 - 8000 = 11152.5 \]