Answered

At Westonci.ca, we connect you with experts who provide detailed answers to your most pressing questions. Start exploring now! Connect with professionals ready to provide precise answers to your questions on our comprehensive Q&A platform. Get quick and reliable solutions to your questions from a community of experienced experts on our platform.

In a certain jurisdiction caroline, who is earning $42,200, currently pays a flat percentage of 25% income tax. The tax authorities suggest a change to a progressive income tac system as follows: 1. Charging 15% on a person's income up to $20,000. 2. Changing 30% on any income above that. How much less will caroline be paying in income tax under the proposed changes? round your answer to the nearest dollar.

Sagot :

chilljain33

The amount of tax paid less by Caroline as per the new taxation policies will be $950 over her annual salary of $42,200 after the taxes are applied assuming deductions being made.

The calculation of tax saved by Caroline will be done on the basis of comparing the taxation rates of both the policies after taking the changes into account.

Calculation of tax savings

The formula for calculation of tax will be done as follows when the taxes are charged on flat basis under the old policy,

[tex]\rm Income\ Tax= Salary\ x\ Rate\ of\ Taxation\\\\\rm Income\ Tax= 42200\ x\ {\dfrac{25}{100}\\\\\\\\\\\\\\rm Income\ Tax= \$10550[/tex]

The taxation for the first $20000 as per the new policy will be

[tex]\rm Income\ Tax\ Threshold= 20000\ x\ \dfrac{15}{100}\\\\\rm Income\ Tax= \$3000[/tex]

Calculating further taxation,

[tex]\rm Income\ Tax= 22200\ x\ \dfrac{30}{100}\\\\\rm Income\ Tax= \$6600[/tex]

So, total taxation as per the new policy will be $9600. Now comparing the taxation of old scheme with new scheme, we get,

[tex]\rm Income\ Tax\ Savings= Old\ Taxation - New\ Taxation\\\\\rm Income\ Tax\ Savings=10550-9600\\\\\rm Income\ Tax\ Savings=950[/tex]

So, the total taxes saved are $950 when the taxation rate changes.

Hence, the correct statement is that tax savings of $950 is possible when the authorities change the taxation rates to such slab rates by Caroline.

Learn more about tax savings here:

https://brainly.com/question/2396701

Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. Thank you for visiting Westonci.ca, your go-to source for reliable answers. Come back soon for more expert insights.