Planning Your Tax Strategy

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Financial Situation

Exhibit $4-1$

Marginal Tax Rates

Correct, this is commonly misunderstood. If you look at the different marginal tax rates, you will notice that income earned at lower tax brackets is taxed at lower rates.

How much income tax would Jamie pay? $($Round to the nearest dollar.$)$

Reader

$$4,644$

Assets:

Checking Account

Savings Account $($Interest earned last year: $ $147)$

Emergency fund savings

account $($Interest earned

last year: $$73)$

IRA balance $($ $$340$

contribution made last

year$)$

Car

Liabilities:

Student loan

$$7,900$

Credit card balance

$($Interest paid last year: $

$$440$

Income:

Gross monthly salary

$$3,000$

Monthly Expenses:

Rent obligation

Utilities

$$645$

$$115$

Food

$$210$

Gas$/$maintenance

Credit card payment

Savings:

Regular savings monthly

deposit

$$180$

Rainy day savings

monthly deposit

$$60$

Entertainment:

Cake decorating class