Question

Tammy earns $40,000 gross annual salary. In Tammy's jurisdiction there is a progressive tax system with rules as follows:

Any amounts earned up to $x are free from income tax.
Any amounts earned beyond $x are taxed at 25%.
Given that Tammy pays $5,400 per annum in income tax, calculate x. You can assume that x<40,000. Give your answer in dollars to the nearest dollar.

Answer 1

The value of x ix $18400.

Explanation:

Any amounts earned up to $x are free from income tax.

Any amounts earned beyond $x are taxed at 25%.

Tammy earns $40,000 gross annual salary and pays $5,400 per annum in income tax.

We can calculate as following; Assuming x < 40000

`5400 =(40000-x)*0.25`

=>
`5400=10000-0.25x`

=>
`0.25x=4600`

x = 18400

Hence, the value of x ix $18400.

Answer 2

$18,400

Explanation:

We need to find what amount's 25% is 5400??

Let this amount be a, so we can say:

a*0.25 = 5400

a = 5400/0.25

a = 21,600

Now

40,000 - 21,600 = 18,400

Thus for the first 18,400 --- the tax is 0

For next 21,600 ---- tax is 25% which is 5400 tax

So amount $18,400 is tax free. x is equal to 18400