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Chapter 8: Problem 18

Unmarried head of household with one dependent child Gross income: \(\$ 40,000\) Adjustments: \(\$ 1500\) Deductions: \(\$ 3600\) state taxes \(\$ 800\) charitable contributions Tax credit: \(\$ 2500\)

Short Answer

Expert verified
The taxable income is \$34,100 and the tax due after credit, assuming a flat tax rate of 20%, is \$4320.

Step by step solution

01

Subtract Adjustments

Start by subtracting the adjustments from the gross income. The gross income here is \$40,000 and the adjustments are \$1500. So, the income after adjustments should be \( \$40,000 - \$1500 = \$38,500 \)
02

Calculate Total Deductions

Next, sum up all the deductions. Here, the deductions are \$3600 in state taxes and \$800 in charitable contributions. So, the total deductions are \( \$3600 + \$800 = \$4400 \)
03

Subtract Deductions

Then, subtract the total deductions from the income after adjustments. The income is \$38,500 and the deductions total is \$4400. So, the taxable income is \( \$38,500 - \$4400 = \$34,100 \)
04

Calculate Tax and Apply Credit

Next, the tax rate needs to be applied to the taxable income to get the tax due before credit. Assume a flat rate of 20% for this example. That would be \(0.20 * \$34,100 = \$6820\). Then subtract the tax credit from this tax due. The tax credit is \$2500. \(\$6820 - \$2500 = \$4320\) is the tax due after credit

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Most popular questions from this chapter

Exercises 19 and 20 refer to the stock tables for Goodyear (the tire d. How many shares of this company's stock were traded company) and Dow Chemical given below. In each exercise, use yesterday? the stock table to answer the following questions. Where necessary, e. What were the high and low prices for a share yesterday? round dollar amounts to the nearest cent. f. What was the price at which a share last traded when the stock a. What were the high and low prices for a share for the past exchange closed yesterday? b. If you owned 700 shares of this stock last year, what dividend g. What was the change in price for a share of stock from the did you receive? h. Compute the company's annual earnings per share using c. What is the annual return for the dividends alone? How does Annual earnings per share this compare to a bank offering a \(3 \%\) interest rate? $$ =\frac{\text { Yesterday's closing price per share }}{P E \text { ratio }} . $$ $$ \begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|} \hline \text { 52-Week High } & \text { 52-Week Low } & \text { Stock } & \text { SYM } & \text { Div } & \text { Yld \% } & \text { PE } & \text { Vol 100s } & \text { Hi } & \text { Lo } & \text { Close } & \text { Net Chg } \\ \hline 56.75 & 37.95 & \begin{array}{c} \text { Dow } \\ \text { Chemical } \end{array} & \text { DOW } & 1.34 & 3.0 & 12 & 23997 & 44.75 & 44.35 & 44.69 & +0.16 \\ \hline \end{array} $$

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