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5. True or False: If Richard is in the 25% tax bracket, that means he pays 25% tax on his total income. Explain.

5. True or False: If Richard is in the 25% tax bracket, that means he pays 25% tax on his total income. Explain.

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter4: Profitability Analysis
Section: Chapter Questions
Problem 23PC
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gross income MINUS adjustments to income EQUALS adjusted gross income TABLE 4.9 Tax Rate" 10% 15% 25% 28% 33% 35% 39.6% Standard deduction Exemption FIGURE 4.13 Flow chart showing the basic steps in calculating income tax. (per person) adjusted gross income MINUS deductions and exemptions EQUALS taxable income $4050 Single up to $9325 up to $37,950 up to $91,900 up to $191,650 up to $416,700 up to $418,400 above $418,400 $6350 2017 Marginal Tax Rates, Standard Deductions, and Exemptions* Married Filing Jointly tax computation based on rates or tables up to $18,650 up to $75,900 up to $153,100 up to $233,350 up to $416,700 up to $470,700 above $470,700 $12,700 MINUS tax credits $4050 EQUALS total tax Married Filing Separately up to $9325 up to $37,950 up to $76,550 up to $116,675 up to $208,350 up to $235,350 above $235,350 $6350 $4050 total tax MINUS payments or withholding EQUALS amount owed (or refund) Head of Household $4050 up to $13,350 up to $50,800 up to $131,200 up to $212,500 up to $416,700 up to $444,550 above $444,550 $9350 *This table ignores (1) exemption and deduction phase-outs that apply to high-income taxpayers; (ii) the alterna- tive minimum tax (AMT) that affects many middle- and high-income taxpayers; (iii) potential changes in tax law made after this text was printed that may have changed the values given in this table for 2017. "Each higher marginal rate begins where the prior one leaves off. For example, for a single person, the 15% marginal rate affects income starting at $9325, which is where the 10% rate leaves off, and continuing up to $37,950. 5. True or False: If Richard is in the 25% tax bracket, that means he pays 25% tax on his total income. Explain. 2
Transcribed Image Text:gross income MINUS adjustments to income EQUALS adjusted gross income TABLE 4.9 Tax Rate" 10% 15% 25% 28% 33% 35% 39.6% Standard deduction Exemption FIGURE 4.13 Flow chart showing the basic steps in calculating income tax. (per person) adjusted gross income MINUS deductions and exemptions EQUALS taxable income $4050 Single up to $9325 up to $37,950 up to $91,900 up to $191,650 up to $416,700 up to $418,400 above $418,400 $6350 2017 Marginal Tax Rates, Standard Deductions, and Exemptions* Married Filing Jointly tax computation based on rates or tables up to $18,650 up to $75,900 up to $153,100 up to $233,350 up to $416,700 up to $470,700 above $470,700 $12,700 MINUS tax credits $4050 EQUALS total tax Married Filing Separately up to $9325 up to $37,950 up to $76,550 up to $116,675 up to $208,350 up to $235,350 above $235,350 $6350 $4050 total tax MINUS payments or withholding EQUALS amount owed (or refund) Head of Household $4050 up to $13,350 up to $50,800 up to $131,200 up to $212,500 up to $416,700 up to $444,550 above $444,550 $9350 *This table ignores (1) exemption and deduction phase-outs that apply to high-income taxpayers; (ii) the alterna- tive minimum tax (AMT) that affects many middle- and high-income taxpayers; (iii) potential changes in tax law made after this text was printed that may have changed the values given in this table for 2017. "Each higher marginal rate begins where the prior one leaves off. For example, for a single person, the 15% marginal rate affects income starting at $9325, which is where the 10% rate leaves off, and continuing up to $37,950. 5. True or False: If Richard is in the 25% tax bracket, that means he pays 25% tax on his total income. Explain. 2
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