Answered step by step
Verified Expert Solution
Question
1 Approved Answer
4.) Calculate your child tax credit ($2,000 for each child under 18) and subtract that from your tax to determine your total income tax for
4.) Calculate your child tax credit ($2,000 for each child under 18) and subtract that from your tax to
determine your total income tax for the year. (The credit is lower for those with higher income, but
well ignore that here.)
5.) Calculate your average tax rate (ATR)the proportion of wage/salary income (line 1) paid for this
income tax (line 15).
6.) Using lines 1 and 15 in the last two columns, calculate your marginal tax rate (MTR) on the last $1,000
earned in 2040.
7.) Calculate your share of the payroll taxes (ignoring the half that the firm passes to you in the form of
lower wages)7.65% of your wage/salary income. (If youve chosen an income above $137,700, the
tax is only 1.45% for the dollars earned above this cap). Then, recalculate your average and marginal
tax rates.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started