Question

Suppose you earn $40,000 per year and pay taxes based on marginal tax rates. The first tax bracket, which taxes at 10 percent, ranges from $0 to $20,000. The second tax bracket, which taxes at 25 percent, ranges from $20,001 to $80,000. How much do you pay in total taxes

Answer 1

Answer: $7,000

Explanation:

given data:

income yearly = $40,000

tax rate = 10% for first $20,000

25% for next $21,000 - $80,000

solution:

tax payable for first $20,000

this is gotten by multiplyomg the tax rate with the first $20,000 income earned.

= 0.1 * $20,000

= $2,000

tax payable for next 21,000 - $80,000

= 0.25 * $20,000

= $5,000

total tax payable = $2,000 + $5,000

= $7,000