Question

Peter’s tax computed as per the tax rate schedule amounts to $2,000, and his tax credits amount to $500. his total tax liability is _____.

Answer 1

Answer: $1500

Explanation: Tax liability is defined as the total amount of tax owed by individuals and organisations in any time period, to local, states, and federal governments. While they are short term liabilities recorded on the balance sheet for organization and usually paid within a year, for individuals, it is covered by withholdings from wages or salary or paid out of pocket.

The tax liability is gotten by taking the total amount of tax on your income computed as per the tax rate schedule, less any non-refundable credits such as tax credit, saver’s credit, dependent care credit etc. including additional taxes like self-employment tax, household employment tax, and tax penalties.

For Peter, his tax liability is equal to $1500 which is $2000 (tax) minus $500 (tax credit).

Answer 2

The answer to the blank that will correspond to the total tax liability of Peter given the taxable income of $2000 and a tax credit is $500 is $2500. Tax liablity is define as the amount of taxation that an individual incurs as mandated by the existing state or country he lives.