Select The Correct Answer.Kirm's Taxable Income Is About $\$72,000$ A Year After Accounting For Deductions Based On The Following Tax Table And The Use Of Tax Brackets In The United States. Which Sentence About The Taxes Payable Is
Introduction
Taxable income is the amount of income that is subject to taxation by the government. In the United States, the tax system is based on tax brackets, which are ranges of income that are taxed at different rates. Understanding how to calculate taxable income and how tax brackets work is essential for individuals and businesses to determine their tax liability. In this article, we will explore how to calculate taxable income and how tax brackets work in the United States.
Taxable Income
Taxable income is the amount of income that is subject to taxation by the government. It is calculated by subtracting deductions and exemptions from gross income. Gross income includes all income earned by an individual or business, including wages, salaries, tips, and self-employment income. Deductions and exemptions are subtracted from gross income to arrive at taxable income.
Tax Brackets
Tax brackets are ranges of income that are taxed at different rates. In the United States, there are seven tax brackets, ranging from 10% to 37%. The tax rate applied to an individual's taxable income depends on which tax bracket they fall into. For example, if an individual's taxable income is $50,000, they will be taxed at the 22% rate, which applies to taxable income between $40,001 and $80,000.
Calculating Taxable Income
To calculate taxable income, we need to subtract deductions and exemptions from gross income. Let's use the example of Kirm, who has a gross income of $100,000 and deductions of $28,000. To calculate Kirm's taxable income, we subtract the deductions from the gross income:
Taxable income = Gross income - Deductions = $100,000 - $28,000 = $72,000
Tax Table
The tax table is a table that shows the tax rates and tax amounts for different ranges of income. The tax table is used to calculate the tax liability of an individual or business. Let's use the tax table to calculate the tax liability of Kirm, who has a taxable income of $72,000.
| Taxable Income | Tax Rate | Tax Amount |
|---|---|---|
| $0 - $9,875 | 10% | $987.50 |
| $9,876 - $40,125 | 12% | $4,731.50 |
| $40,126 - $80,250 | 22% | $12,046.50 |
| $80,251 - $164,700 | 24% | $23,049.50 |
| $164,701 - $214,700 | 32% | $32,049.50 |
| $214,701 - $518,400 | 35% | $134,049.50 |
| $518,401 - $622,050 | 37% | $164,049.50 |
Calculating Taxes Payable
To calculate the taxes payable of Kirm, we need to use the tax table. We will start by calculating the tax amount for each tax bracket and then add them up to arrive at the total tax liability.
For the first tax bracket, $0 - $9,875, the tax rate is 10% and the tax amount is $987.50.
For the second tax bracket, $9,876 - $40,125, the tax rate is 12% and the tax amount is $4,731.50.
For the third tax bracket, $40,126 - $80,250, the tax rate is 22% and the tax amount is $12,046.50.
For the fourth tax bracket, $80,251 - $164,700, the tax rate is 24% and the tax amount is $23,049.50.
For the fifth tax bracket, $164,701 - $214,700, the tax rate is 32% and the tax amount is $32,049.50.
For the sixth tax bracket, $214,701 - $518,400, the tax rate is 35% and the tax amount is $134,049.50.
For the seventh tax bracket, $518,401 - $622,050, the tax rate is 37% and the tax amount is $164,049.50.
However, since Kirm's taxable income is only $72,000, we only need to consider the first three tax brackets.
Tax amount = $987.50 + $4,731.50 + $12,046.50 = $17,765.50
Conclusion
In conclusion, Kirm's taxable income is $72,000, and the taxes payable are $17,765.50. This is calculated by subtracting deductions from gross income and then using the tax table to calculate the tax liability.
Discussion
Which sentence about the taxes payable is correct?
A) Kirm's taxes payable are $17,765.50. B) Kirm's taxes payable are $72,000. C) Kirm's taxes payable are $100,000. D) Kirm's taxes payable are $28,000.
Q: What is taxable income?
A: Taxable income is the amount of income that is subject to taxation by the government. It is calculated by subtracting deductions and exemptions from gross income.
Q: How do tax brackets work?
A: Tax brackets are ranges of income that are taxed at different rates. In the United States, there are seven tax brackets, ranging from 10% to 37%. The tax rate applied to an individual's taxable income depends on which tax bracket they fall into.
Q: How do I calculate my taxable income?
A: To calculate your taxable income, you need to subtract deductions and exemptions from your gross income. You can use the following formula:
Taxable income = Gross income - Deductions
Q: What are deductions?
A: Deductions are expenses that can be subtracted from gross income to arrive at taxable income. Examples of deductions include charitable donations, mortgage interest, and medical expenses.
Q: What are exemptions?
A: Exemptions are amounts that are not subject to taxation. Examples of exemptions include the standard deduction and personal exemptions.
Q: How do I use the tax table to calculate my taxes payable?
A: To use the tax table to calculate your taxes payable, you need to follow these steps:
- Determine your taxable income.
- Identify the tax brackets that apply to your taxable income.
- Calculate the tax amount for each tax bracket.
- Add up the tax amounts for each tax bracket to arrive at your total taxes payable.
Q: What is the difference between gross income and taxable income?
A: Gross income is the total amount of income earned by an individual or business, including wages, salaries, tips, and self-employment income. Taxable income is the amount of income that is subject to taxation by the government, calculated by subtracting deductions and exemptions from gross income.
Q: Can I deduct all of my expenses from my gross income?
A: No, you can only deduct expenses that are allowed by the tax code. Examples of deductible expenses include charitable donations, mortgage interest, and medical expenses. You should consult with a tax professional to determine which expenses are deductible.
Q: What happens if I have multiple sources of income?
A: If you have multiple sources of income, you need to calculate your taxable income from each source separately and then add them up to arrive at your total taxable income.
Q: Can I change my tax filing status?
A: Yes, you can change your tax filing status from year to year. However, you should consult with a tax professional to determine which filing status is best for your situation.
Q: What is the deadline for filing my taxes?
A: The deadline for filing taxes is typically April 15th of each year. However, you should consult with a tax professional to determine the deadline for your specific situation.
Q: Can I file my taxes electronically?
A: Yes, you can file your taxes electronically using tax preparation software or through the IRS website.