Thinking Mathematically (6th Edition)

Published by Pearson
ISBN 10: 0321867327
ISBN 13: 978-0-32186-732-2

Chapter 8 - Personal Finance - 8.2 Income Tax - Exercise Set 8.2 - Page 507: 24

Answer

See below:

Work Step by Step

(a) In order to calculate FICA taxes, multiply wages with the tax rate. \[\begin{align} & \text{FICA}\,\text{taxes}=\text{Wages}\times \text{Tax}\,\text{rate} \\ & =\$18,000\times5.65\text{percent}\\&=\$18,000\times0.0565\\&=\$1,017\end{align}\] (b) In order to calculate income tax, first calculate taxable income by deducting the sum of exemptions and deductions from adjusted gross income. \[\begin{align} & \text{Taxable}\,\text{income}=\text{Adjusted}\,\text{gross}\,\text{income}-\left( \text{Exemptions}+\text{Deductions} \right) \\ & =\$18,000-\left(\$3,800+\$5,950\right)\\&=\$18,000-\$9,750\\&=\$8,250\end{align}\] Now, calculate income tax by multiplying $8,700 with 10% tax rate \[\begin{align} & \text{Income}\,\text{tax}=10\text{percent}\times \$8,250\\&=0.10\times\$8,250\\&=\$825\end{align}\] (c) In order to calculate the percent of federal taxes, divide the sum of FICA taxes and income tax with gross income and multiply by 100. \[\begin{align} & \text{Percent}\,\text{federal}\,\text{taxes}=\frac{\text{FICA}\,\text{taxes}+\text{Income}\,\text{tax}}{\text{Gross}\,\text{income}} \\ & =\frac{\$1,017+\$825}{\$18,000}\\&=\frac{\$1842}{\$18,000}\\&=0.1023\end{align}\] \[\begin{align} & =0.1023\times 100 \\ & =10.23\approx 10.2\text{percent} \\ \end{align}\]
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.